The “New Normal” According To One Fed Official

Sandra Pianalto, the President and CEO of the Federal Reserve Bank of Cleveland has predicted that our recovery from the Great Recession will be slow and that the end result will be a “new normal” where Americans’ expectations for a better life are diminished.  Read the entire article on the Huffington Post here.  A full transcript of Pianalto’s remarks are included in that article.

I don’t know why this is news, exactly.  Anyone out in the real world knows that this “recovery” is slow and most Americans aren’t planning anything farther into the future than how they’re going to pay the power bill when it comes due. 

Many people are now just aiming for ‘financial security’ as their American dream.

This downward shift in expectations isn’t something that has happened overnight. True, during the bubble years, when everyone was able to use cash out of their rapidly burgeoning home equity to buttress them against the effects of low wages and a high cost of living, Americans were able to have a semblance of a stable middle class life.


Part of the problem that no one, including Ms. Pianalto,  has addressed is that the time of reckoning for years of allowing our good paying manufacturing jobs base to be shipped overseas is upon us.  No longer can we depend on bubbles, be they of the variety or the housing variety, to prop up an economy that is largely based on low paying service industry jobs.

I remember in the 1990’s, during the debate about the North American Free Trade Agreement (NAFTA,) politicians on both sides of the aisle saying that the old jobs in manufacturing had long disappeared, but that this was ok because we were becoming a technological, information based society. They waxed on about how there would be many better jobs created, but that education and flexibility would be key. President Clinton has said many times that the average worker will have to change careers much more frequently than in the past.

Well, the technology jobs have all been outsourced as well as the manufacturing jobs. What do we have left? A mixture of “would you like fries with that?” and debt collectors.  Furthermore, as employment levels have tightened, more and more, for lack of a better term, “would you like fries with that” types of jobs are requiring job applicants to have college degrees!

Another effect of what President Clinton euphemistically called the need for Americans to be “flexible” is that changing careers a number of times does not allow a person to gain enough seniority to earn higher wages and collect enough benefits to feel secure.  While changing careers if you decide that your current one no longer fits you and you’d like to do something else is a good thing, having to change careers because your current one has disappeared (i.e. outsourced to India) is not.

In the new economy that has emerged since the nineties, the need for higher education has never been greater. However, having a degree does not guarantee security and a middle class lifestyle for anyone, either. One of the reasons for this I’ve already described in the previous paragraph. Another reason is the constant need to seek more and more education; piling on more and more student loan debt that increasingly can’t be paid back on the wages of the available jobs. 

I’m all for education…I have two degrees myself and would very much love to return to school for more, this time in the true field of my choice: geology. Having said that,  requiring a degree for everything aside from the most menial of jobs doesn’t make sense financially. To say to someone that they need to get a $30,000  degree when the jobs available don’t pay that dollar amount as a yearly salary is beyond ludicrous.

I realize that I’ve painted a grim picture here, but it is nothing less than the truth. We can make things better, however, if we’ve the will to raise our voices so that those who we’ve elected to represent us can hear.

The first thing we need to do is rebuild our crumbling infrastructure. This will create millions of good paying manufacturing jobs, many of them in newer “green technologies.”  As the effects of people in secure good paying jobs ripple out toward the rest of the economy with an increased demand for goods and services, we must also commit to making things again apart from infrastructure related projects. Unless we do this, we will continue to live under diminished expectations, which is pretty darned not in character for the “can-do” America that we used to be.

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