ECONOMIC SCENE: US living standards may languish even after recession
Sluggish growth could last for decades, economists say.
Melanie Stetson Freeman / Staff
Once the great recession ends, don’t break out the party hats. What follows it could be a period of growth so weak that the average American’s standard of living may not reach its 2007 level for years.
Americans will have “to live a little differently,” says Harald Malmgren, a Washington economic consultant. He forecasts that the United States economy will not bounce back to the 3 or 4 percent average real annual growth rate for gross domestic product (GDP – the output of goods and services) that has prevailed for several decades. Rather he sees “sluggish growth” for not just a year or two, but possibly decades. That means consumers’ discretionary purchases are going to be “pretty limited,” he adds.
Every downturn has its share of doom-sayers. But even a cheerier economist, Nariman Behravesh, of IHS Global Insight in Lexington, Mass., doesn’t dismiss the idea of a lower US standard of living. He forecasts a modest GDP growth rate of 2.5 to 3 percent a year, not enough to bring down unemployment to a reasonable rate soon.
The concern that these economists share is that confidence-shaken Americans have switched from a habit of spending like crazy to saving like crazy. So domestic consumption will not give the economy a big surge of growth in the near future.