Are we now suffering from irrational pessimism?
The New York Times reports that things are better for the majority of the US population even as we suffer through this downturn. Hmm, very hard for me to believe that.
But just as Americans fell victim to "irrational exuberance" in the late 1990's, exaggerating the underlying strength of the economy, today's equally fashionable pessimism appears overdone as well. And that means there are still plenty of good reasons to be confident about the health of the American economy over the next decade.
...Even after the latest revisions shaved earlier estimates, the annualized rate of productivity growth — which measures our ability to improve the nation's standard of living by producing more in each hour of work — appears to have been a robust 2.6 percent from 1995 through 2000. And despite the usual tendency to fall sharply in a recession, those productivity numbers are holding up well through the current slowdown.
...Those gains have translated into real benefits for nearly all Americans. The official unemployment rate fell below 4 percent in the late 1990's for the first time since the 1960's, reaching the state of economic nirvana that experts call full employment, in which essentially any working-age person who wants a job can find one. The unemployment rate has since risen, but it remains considerably lower than at comparable stages in past economic cycles.
Wage increases for the average worker, whose income had stagnated in real terms for two decades, easily outpaced the low rate of inflation from 1993 through 2001. Poverty fell sharply as those at the bottom of the income ladder shared in the gains for the first time in a generation. Many more people became homeowners and, yes, investors, enjoying improvements in personal wealth that even with falling stock prices remain far above the levels of a decade ago.