ECONOMIC SCENE
In the Rearview, a Year That Fizzled
By DAVID LEONHARDT
Published: December 28, 2010
Washington
Minh Uong/The New York Times
Related
Economix Blog: The Recovery That Was - and Then Wasn't(December 29, 2010)
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It was the year that the economy started to recover and then slid back into a slump — only to offer reason for renewed hope in the final weeks.
When 2010 began, hiring and consumer spending were finally picking up. But then something changed in the spring — a combination of the debt troubles in Europe, the fading of stimulus spending and the usual caution by businesses and consumers after a financial crisis. By the summer, the unemployment rate was rising again, and Americans’ attitudes about the future were again souring.
Making matters worse, many of the economy’s long-term problems also became more severe this year. Health care costs continued to rise faster than inflation, and the number of uninsured continued to grow. The most recent climate data suggested 2010 would be the hottest or second-hottest year ever recorded; the 10 hottest have all occurred in the last 13 years, creating serious risks for the planet and its economy. The federal budget deficit ballooned further (though it should grow during an economic slump).
The reasons for optimism about 2011 come from both Washington and the private sector. The Federal Reserve and Congress have finally taken more action to lift economic growth, and the latest data — on consumer spending and jobless claims, among other things — has been good. The housing market remains weak, but sales and prices are no longer plunging.
On the longer-term issues, the recent work by President Obama’s bipartisan deficit commission suggested that Democrats and Republicans might eventually find some common ground on the issue. And the health care overhaul passed in March — assuming it survives legal challenges — is likely to cut the number of uninsured sharply and to reduce cost growth modestly. The one issue that offers little reason for optimism is climate change.
Among the big questions for 2011 are: How severe will state and local budget crises turn out to be? Will Europe’s debt troubles spread to Spain, Portugal or elsewhere? Will Congress and the White House manage to focus on the long-run causes of the deficit — or instead cut federal spending immediately and jeopardize the recovery? Will consumers continue to increase their spending and give businesses the confidence to hire?
To look back at 2010 and to look ahead, we have put together a series of charts. If there is an overall message, it’s that the economy still needs a whole lot of work.
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