The New Normal: High Unemployment and Slower Growth

Created: May 26, 2009 09:15 | Last updated: July 31, 2020 00:00

The U.S. economy may never return to the days of rapid expansion, Bloomberg reports, and an unemployment rate greater than eight percent and a long period of slower growth may become the “new normal,”

The U.S. financial crisis and recession have produced lasting shifts in consumer spending and savings reminiscent of the 1950s that may crimp profits and productivity, said David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto and former chief North American economist at Bank of America Corp.

“This is going to be a new era of frugality,” Rosenberg said. “This isn’t some flashy two- or three-quarter deal. This is a secular change in household attitudes.”

Rosenberg also says the new normal will resemble in some way the Eisenhower years of the 1950s — which is not necessarily a bad thing.

“Life wasn’t so bad for the Cleavers,” he said, referring to the family depicted in “Leave It to Beaver,” the television show that ran from 1957 through 1963. “They weren’t up to their eyeballs in debt and they weren’t a three-car family with a 5,000-square-foot McMansion.”

The “new normal” is an interesting perspective, considering many economists are looking for signs the economy has bottomed out. But when, specifically, the downturn ends may not really matter. Maybe we should be thinking instead about what kind of recovery lies ahead.