Obama's economy is recovering, but problems remain

  • Article by: JOSH BOAKAP , Associated Press
  • Updated: January 28, 2014 - 11:50 PM

Obama must contend with lagging employment, slow income growth and diminished career prospects.

President Barack Obama gives his State of the Union address during a joint session of Congress on Capitol Hill in Washington, D.C., Tuesday, January 28, 2014. (Olivier Douliery/Abaca Press/MCT) ORG XMIT: 1148429 ORG XMIT: MIN1401282043133819

– The U.S. economy is showing more strength than at any time since the Great Recession began six years ago.

Employers are hiring. Home prices, sales and construction have surged. Corporate profits and stocks have hit records. Consumers have picked up their spending.

The economy has yet to fully recover from the most devastating crisis since the Great Depression. But it’s getting closer — a point President Obama highlighted in his State of the Union address.

By the middle of this year, after years of steady but sluggish improvement, the United States is expected to have finally regained all the 8.7 million jobs lost during the recession, which ended four years ago. Many economic forecasters say the economy should grow 3 percent or more this year. That would be its best performance since 2005.

And yet in some ways, the lopsided nature of the half-decade global recovery leaves Obama with little to celebrate. Much of the U.S. labor force has gone without pay increases. Millions have struggled for more than six months to find work. Others have had to accept lower-paying jobs and diminished career prospects.

Forty percent of Americans identify themselves as lower or lower-middle class, according to a survey released Monday by the Pew Research Center. Just 25 percent of the country felt that way in 2008.

The world economy remains fragile. That was driven home this month by turmoil in emerging economies that sent the U.S. stock market falling.

Jobs growth is steady

Job growth has been remarkably steady in an uneven recovery. Employers have added at least 2.1 million jobs in each of the past three years, creating momentum that could help the economy gain speed in 2014. Each new job puts more money in the hands of people to spend.

That’s why consistent job growth can give more traction to the recovery. The unemployment rate has plunged from 7.9 percent to 6.7 percent over the past year. That’s down from a 10 percent peak in October 2009.

Still, the benefits of more hiring have been muted so far, in part because much of it has been concentrated in the low-wage industries. Also, millions of jobless Americans have stopped looking for work. As a result, the unemployment rate can fall in a way that overstates the health of the economy.

In December, for example, the unemployment rate fell from 7 percent to 6.7 percent, but that was mainly because a wave of Americans stopped looking for work.

Housing prices are rising

Real estate is rebounding. Home prices have climbed 13.7 percent over the past 12 months, according to a Standard & Poor’s index released Tuesday. Sales of existing homes totaled 5.09 million last year, the best such performance since 2006, the National Association of Realtors said last week.

Home industry experts say the gains should continue this year, though at a slower pace because higher mortgage rates and home prices will make buying less affordable.

Consumer spending is up

The spending of consumers, which fuels 70 percent of the economy, is returning to its prerecession levels.

The Conference Board said Tuesday that its consumer confidence index rose to 80.7 this month, well above last year’s average of 73.3.

  • related content

  • OLIVIER DOULIERY • Abaca Press, top; J. SCOTT APPLEWHITE • Associated Pressnew initiatives: President Obama, who was greeted upon his arrival Tuesday night, announced plans to help workers whose employers don’t offer retirement savings plans and the creation of four “manufacturing hubs” where universities and businesses would work together to train workers.

  • Army Ranger Sgt.1st Class Cory Remsburg acknowledges applause from first lady Michelle Obama and others during President Barack Obama's State of the Union address on Capitol Hill in Washington, Tuesday Jan. 28, 2014. (AP Photo/J. Scott Applewhite) ORG XMIT: MIN2014012822425244

  • LARRY DOWNING • New York Times, from top; SCOTT APPLEWHITE • Associated Press; DOUG MILLS • New York Times‘never gives up’: President Obama on Tuesday reached out to shake the hand of Rep. Michele Bachmann, R-Minn., above. At center, Army Ranger Sgt. 1st Class Cory Remsburg acknowledged the applause after the president called on the nation to draw inspiration from his story. Remsburg, who Obama said “never gives up, and never quits,” was blinded in one eye by a roadside bombing in Afghanistan during his 10th deployment. At top, Obama left through the crowd after his speech.

  • President Barack Obama departs through the crowd after delivering the State of the Union address at the Capitol Building in Washington, Jan. 28, 2014. (Larry Downing/Pool via The New York Times) -- FOR EDITORIAL USE ONLY ORG XMIT: MIN2014012822434947

  • get related content delivered to your inbox

  • manage my email subscriptions


Connect with twitterConnect with facebookConnect with Google+Connect with PinterestConnect with PinterestConnect with RssfeedConnect with email newsletters