In Nowhere Close: The Long March from Here to Full Employment, EPI Research and Policy Director Josh Bivens demonstrates that the U.S. economy is far from full recovery or full employment. In fact, the U.S. economy is not even halfway towards what could reasonably be considered being fully recovered from the Great Recession. Bivens makes a forceful case that restoring full employment should re-emerge as policymakers’ most pressing priority.
Through 15 charts examining trends in employment, components of GDP, and macroeconomic indicators, Bivens outlines the extraordinarily large shortfall in demand that continues to hold back the economy and which has resulted in the slowest GDP growth at this point in any recovery in the post-World War II era. Moreover, unless policymakers make returning to full employment a priority, there is no guarantee that GDP growth will accelerate fast enough to deliver full employment in the coming years.
“It’s no real mystery why the U.S. economy is so depressed even as we enter the seventh year since the Great Recession,” said Bivens. “We not only failed to fully counteract the negative demand shock of the burst housing bubble, we have in the last couple of years put policy flatly in reverse, pursuing unprecedented austerity. It’s time to reverse course—full employment is far too important to be complacent about.”
Bivens points out two factors that could lead to an acceleration of demand growth if policymakers act decisively: public spending and net exports. If public spending at all levels of government in the current recovery matched its growth over the early 1980s recession and recovery, it would be roughly $800 billion higher today, which would put the economy almost at full recovery. Meanwhile, boosting the competitiveness of U.S. exports by letting the value of the U.S. dollar fall to would also provide a much needed boost in aggregate demand going forward.