A congressional committee held a hearing Wednesday to examine why the economic recovery has been so slow, with many still struggling nearly a decade later.
The recession was sparked by the subprime mortgage and the financial crisis of 2007. It was followed by an incredibly slow recovery. The economy has strengthened over the last year, but there are still lingering issues. The Joint Economic Committee held Wednesday’s hearing to examine why the recovery has been so slow and uneven.
“The U.S. economy did not surge back from the last recession, has it has done every other recession since World War II, and we’re paying the price for that,” Committee Chairman Pat Tiberi said during the hearing. “The drawn-out recovery and meager growth rate that we’ve settled into has exasperated many of our problems.”
President Donald Trump promised to help the working class by spurring economic growth. He has focused on trade and reducing regulatory burdens. Former President Barack Obama oversaw the recovery throughout his time in office, but was able to eventually see steady economic gains in his final years.
Economic Innovation Group founder John Lettieri believes much of the problem stems from a lack of innovation and change in our economy. He adds there has been fewer startups and turnovers in business. The lack of change could be creating fewer opportunities for workers and decreased competition for businesses.
“In this supposed age of the gig economy, automation and artificial intelligence, conventional wisdom would certainly have us believe people are experiencing too much and too rapid change,” Lettieri told the committee. “But I disagree. In fact, I believe our economy is experiencing too little change.”
Lettieri said lawmakers should focus on helping to promote business creation and competition. New startups and increased competition can promote innovation, which could result in increased economic growth and more opportunities. Innovation also means better goods and services for consumers.
“We need a radical new focus on business creation and increased competition,” Lettieri said. “A broad pro-growth agenda is needed, but we should also be bold in incorporating ideas aimed at helping struggling regions regain their footing.”
Lettieri adds lawmakers should also push for enhanced labor market flexibility, fund infrastructure and be more data driven. Center on Budget and Policy Priorities senior fellow Dr. Jared Bernstein counters that economic growth is not enough, and more needs to be done to ensure different communities can experience those gains.
“Though the U.S. economy continues to grow steadily at moderate rates, and the labor market is close to full employment, many barriers to economic opportunity and mobility remain in place,” Bernstein said during the hearing. “Some Americans are doing great in today’s economy, but many are not.”
Bernstein adds that there should also be attention given to those regions that have been slower to recover. He notes income inequality, access to education, residential segregation by income and market growth has been worse in rural regions compared to metro areas.
The United States Department of Agriculture looked at the how rural regions recovered compared to metro areas. It found rural employment recovered at a much slower pace. Nonmetro employment was 2.9 percent below where it was prior to the recession. Metro employment, in contrast, exceeded its pre-recession peak by 4.8 percent.
The economy has steadily added jobs over the last few years and now is close to full employment. The employment rate, however, doesn’t factor in those that have dropped out of the workforce like the participation rate does. The Gross Domestic Product last year jumped to 3.5 percent after being stuck around one percent.
The labor force participation rate has declined significantly since the last recession almost a decade ago. The rate tracks the number of employed and those actively seeking work as a percentage of the total population. The Congressional Budget Office predicts the participation rate will continue to fall over the next three decades.