Tags: Lee | economy | growth | job

Citigroup's Lee: Economy Might Not Have 'Healed From 2008 Trauma'

By    |   Wednesday, 22 April 2015 06:40 AM

While the Great Recession ended almost six years ago, the economy has grown only 2.2 percent a year since then, well below historical averages.

"We believe the diagnosis that the U.S. economy has healed from the 2008 trauma may be overstated or incorrect," Citigroup economist William Lee wrote in a commentary obtained by CNBC.

"This may explain why expectations have been disappointed following the recent flood of apparent downward surprises regarding the growth outlook."

The economy grew only 2.2 percent in the fourth quarter, and the Atlanta Federal Reserve Bank's forecasting model puts first-quarter growth at just 0.1 percent.

Lee attributes much of the economic weakness to the dollar's recent surge to multi-year highs against a range of currencies and to the sluggish job market. A strong dollar curbs our exports and has put a dent in corporate earnings.

While non-farm payrolls rose 2.95 million last year, job growth "has been too slow" and concentrated in low-wage sectors, Lee said. "With so many low-wage jobs created, there may not be sufficient income growth to boost demand and GDP growth beyond the current tepid pace."

The economy created only 126,000 jobs in March, the worst showing since December 2013.

Former Treasury Secretaries Hank Paulson and Larry Summers are concerned about economic weakness too.

"The good news is we're growing, we're creating jobs, property values are rising. The bad news is we're not growing quickly enough, and there's tremendous income disparity," Paulson told CNNMoney

"The greatest threat is our own political inability to deal with the sorts of things we need to deal with to strengthen and revitalize our economy."

Summers has expressed concern that the economy is in the midst of a long period of below-trend growth. And he believes we need more infrastructure investment by the government to pull us out of the muck.

"We are doing less investment in infrastructure than at any time since the Second World War on a net basis," Summers told CNNMoney.

"[This] is a moment for us, as a country, to do what a business would do, which is to take advantage of low borrowing costs to invest in our future," he noted. "This is not the right moment for a lurch to austerity."

The 10-year Treasury yields only 1.90 percent.

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While the Great Recession ended almost six years ago, the economy has grown only 2.2 percent a year since then, well below historical averages.
Lee, economy, growth, job
Wednesday, 22 April 2015 06:40 AM
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