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One of my favorite children’s stories is “Tear-Water Tea.” Located in a young readers’ book called Owl At Home by Arnold Lobel, “Tear-Water Tea” is about an owl who identifies sad things so that he can fill his teapot with his tears. Moving from “Chairs with broken legs” to “Songs that cannot be sung because the words have been forgotten” and “Mornings nobody saw because everybody was sleeping,” Owl cites a litany of heartbreakers until the pot is full.
If we were writing an economic “Tear-Water Tea,” the following graphs about the US recovery from the Great Recession of December 2007-June 2009 might be included.
Sluggish GDP Growth:
The value of goods and services produced during one year, the GDP can be a barometer of a recovery. When it soars, so too can employment, incomes and spending. With GDP growth hovering below 5% and also declining, you can see the opposite in this graph.
Underutilizing our land, labor and capital means our GDP is lower than it could be. The result, below, is an output gap between actual and potential GDP that will jeopardize our attempts to minimize unemployment.
Slowly diminishing Unemployment:
You can see that compared to other recessions, high unemployment is creeping downward from an unusually high level at a tepid rate.
Our bottom line: Just contemplate an economic recovery with sluggish GDP growth, a worrisome output gap and slowly diminishing unemployment and you get an entire kettle of tear-water tea.