The Recovery Paradox

The old joke among economists is that a recession is when your neighbor loses his job, but a depression is when you lose yours. In the 1980 presidential campaign, Ronald Reagan made the line political by adding, “A recovery is when Jimmy Carter loses his.” This year, quite a few Republicans are substituting President Obama’s name for Carter’s. But the real question is, When do people feel that we’re in a recovery? Is it when your neighbor gets a job and you get a raise? If so, we’re not there yet. The unemployment rate is still high. The housing market is lousy. And while Wall Street and the stock market are roaring back, millions of Americans read about a recovery but don’t yet believe in it.

Our cover story by Curious Capitalist columnist Rana Foroohar and Money columnist Bill Saporito explains why. Real-wage growth has been stagnant since the 1970s, longer than most people have been working. The new jobs are clustered at the top and bottom; there aren’t enough in the middle. And while we’re doing a whole lot better than Europe, people are looking at China’s growth rate, not France’s.

But we are doing better, and that’s likely to continue. I believe in American economic exceptionalism, which at its core suggests that we’re more innovative and ingenious than our competitors and that we figure out a way to win. Chinese businessmen study American entrepreneurs to learn how to make their own economy more creative. But as our story makes clear, we can’t continue to take shortcuts. We have to invest in education, figure out our immigration strategy, fix the housing crisis, streamline the tax code and create an even more hospitable environment for our entrepreneurs. That’s a real recovery.

Richard Stengel, MANAGING EDITOR