2011 US Economy: “Economic Re-Arrangement” may be more accurate a description of the state of the U.S. Economy than “Recession”

For the last 3 years, there has been a regular barrage of news on the recession, news of jobs improvements, news of non-farm payrolls rising and falling and generally a whole lot of people and politicians on TV saying a whole lot about the state of the economy.

One term almost everyone seems to agree upon is that the U.S. is in a Recession.

I somewhat disagree. While recession may be an accurate economic classification, perhaps what the U.S. economy is going through today can be more accurately classified as “Economic Re-Arrangement”. I believe what we are seeing today is actually the end-game of this “Economic Re-Arrangement” that actually started when manufacturing jobs started leaving U.S. shores.

Here are some facts:

• In the mid sixties, manufacturing accounted for 53 percent of the U.S. Economy
• In 1988, manufacturing accounted for about 39 percent
• In 2004, it accounted for 9 percent

With all the free trade agreements that the U.S. has signed, the country enjoyed 3 decades of rising purchasing power where people in the U.S. could buy more for every dollar because the products people purchased were made at cheaper manufacturing locations. People could shop everyday at Wal-Mart, Target and wherever else they chose for very low priced products.

But there does come a time when the service sector just cannot absorb a workforce that was previously employed in the manufacturing sector. And that’s when this “Economic Re-Arrangement” happens.

I think that the decade beginning 2010 is going be one with high unemployment, low paying service sector jobs for most and a general drop in benefits for the poor and the aged.

This process is not entirely bad. Britain saw a huge industrial decline after World War II. The British economy has also been pretty sluggish for most of 2000 – 2010 but from a high unemployment rate of 11.3% in 1986 the unemployment rate today is at: 7.6% in March 2011. But overall people in Britain do still enjoy a developed country’s lifestyle.

I think this process of stabilization will happen in the next few years and people will re-adjust to a new way of living and spending.