Number-2, February 2019

James W. Hughes & Joseph J. Seneca, Editors James W. Hughes Joseph J. Seneca W e have just passed through a decade of economic disruptions that we just didn’t see coming. Deceptively, this past decade’s opening year (2000) provided only pleasant surprises, beginning with the fizzled failure of the over-hyped and much-dreaded Y2K bug to appear and solid job growth that seemed to promise there would be no interruption of a long period of unrelenting American prosperity.1 Between November 1982 (the end of the deep 1981–1982 recession) and March 2001 (the end of the 1991–2001 expansion), total employment in the United States increased by an astounding 43.7 million jobs, with 38.8 million of these gained in the private sector. Visions of an ebullient post-millennial economy abounded. Unfortunately, the reality turned out to be punishingly different. Fast forward a decade. It is now Y2K+10. Already onetenth of the twenty-first century is gone. But, most of the nation should be very happy that it is gone! In retrospect, the century’s opening 10-year period comprised America’s lost economic decade.2 For the first time since the 1930s, the nation experienced a loss in private-sector jobs, shedding more than 2.9 million private-sector jobs during the entire decade. The “Great American Job Creation Machine” that generated over 38 million jobs during the late twentieth century stalled badly in the new millennium. During the decade, the nation did experience a mid-period economic expansion (November 2001–December 2007) that was, in fact, considerably longer (73 months) than the average length (57 months) of the 10 preceding post–World War II expansions. But, it was bookended by two severe recessions: 2001 when the tech bubble burst, and 2007–2009 when the housing bubble burst. And the economic expansion, while relatively long, was weak in terms of job growth. It was also, as it turned out, debt-driven and ultimately proved unsustainable. Its main products were unprecedented housing and credit bubbles, rather than lasting income and employment gains.3 And the widespread aftershocks of the bursting bubbles sent America into the Great Recession (2007–2009), the worst economic decline since the Great Depression. The good news is that this decade has now been relegated to the history books. As the first year of a new decade unfolds, the nation is no longer staring at the depths of recession but rather is anticipating potential economic recovery. Accordingly, it is now time to look forward with the perspective of hindsight and assess some key lessons of recent post-millennial events, particularly those that led to the seismic economic downturn. This report will focus on a series of observations and questions about our recent economic past, about the prospects for the current year, and about the likely economic context for the second decade of the twenty-first century. (continued on page 2) 1 The end-of-century period of extraordinary job growth, November 1982 to March 2001, was punctuated only by a very mild and shallow 8-month-long recession (July 1990–March 1991). During this entire 18-plus-year period, the United States was transformed from a fading manufacturing dynamo into a powerful post-industrial, knowledgebased, information-age economy. 2 We measure the decade from December 1999 to December 2009, recognizing that there are alternative starting and ending dates that are used to define decades. 3 Trillions of dollars were poured into housing, dubious financial products, and excessive personal consumption expenditures rather than into the wealthand job-creating economic foundations of tomorrow. Y2K+10: A New Decade Unfolds