The tentative American economy

THE American economy continues to stumble. It's creating jobs at a goodly clip, but other aspects of growth are less impressive. Business investment has been lacklustre. The housing recovery is improving but remains short of where many economists thought it would be. Consumer spending, representing slightly more than two-thirds of total spending, has been soft. The economy has a tentative quality that repeatedly disappoints forecasts of stronger growth.

My main explanation for this - as I've argued before - is the hangover from the 2008-09 financial crisis and the Great Recession. They changed economic psychology, precisely because they were unanticipated and horrific. They transcended the experience of most Americans (that is, anyone who hadn't lived through the Great Depression). Corporate executives and consumers became more defensive; they saved and hoarded more.

But this shift in climate isn't all that's happening. It's reinforced by widespread business practices. In economics, many companies are striving to convert "fixed costs" - money they have to pay - to "variable costs", money they can pay or not, depending on their needs. Companies seek more flexibility, which is good for them. The downside is that their "flexibility" becomes workers' "insecurity", which is bad for them.