Economist: This Recovery Is Broad-Based And Stable
LINDA WERTHEIMER, HOST:
This is WEEKEND EDITION from NPR News. I'm Linda Wertheimer. The economy had a shaky start in 2014. The polar vortex early in the year was a blow to the economy. But as the year ends, new numbers released just last week show that the economy is growing and growing increasingly fast. Mark Zandi is the chief economist at Moody's Analytics. He joins us from WHYY in Philadelphia to talk about whether this rebound will continue into 2015. Mr. Zandi, welcome.
MARK ZANDI: Thank you. It's good to be with you.
WERTHEIMER: Now for the last year, you and other people in your line of work have talked about that. That the economy is improving. That the economy is getting stronger. But there are also lots of reasons to believe that the American people don't feel it and therefore don't believe it. Why is that?
ZANDI: That's true. I think it's because, for most people, they have a job, they're working, and what matters to them is their wages - whether their wage is keeping pace with the rate of inflation and whether their pay increase this year is bigger than last year. And so far at least, they can't say that. All that they can say is, yeah, my wage growth has been consistent with inflation. My standard of living has been roughly unchanged, and this is still a pretty blase economy. They really haven't felt the benefits of the better economy, at least not yet.
WERTHEIMER: You know, if we think back to the last boom in the '90s that was driven by computers and the Internet, we had the unfortunate boom of real estate, which was a bubble that burst. What's driving this growth, and does it feel like it could burst?
ZANDI: This is real. This is not based on a bubble. It's not based on a tech bubble, housing bubble or any other kind of bubble. And perhaps the most encouraging this is the growth isn't being driven by a sector or two sectors. It's very broad-based. This feels more fundamental to me, and thus, I am confident - more confident this will be longer lasting.
WERTHEIMER: The Pew Research Center has recently reported that wealth and equality, the gap between the rich and the poor, is the widest it's been in at least three decades. It's obviously not yet a good economy for everybody.
ZANDI: You know, I think that is weighing on the collective psyche and people's perceptions about the economy and will continue to do so for quite some time because the broader forces at work creating this skewing of the distribution of wealth, income and consumption are still largely in place and will remain in place for some time. So that's not something that's going to go away. So, you know, people will feel better a year from now or two years from now, but they're not going to feel great. And one of the reasons is because of this skewed distribution of wealth.
WERTHEIMER: So do you see anything out there that could derail this current improvement? The Federal Reserve keeps suggesting that they're going to raise interest rates next year. Would that be something that could slow down or put the brakes on what looks like a pretty steady improvement?
ZANDI: Well, Linda, I am an economist, and I do have two hands so there are other ways of looking at this. Yes, there are risks, and you put your finger on one of the key one, and that is rising interest rates. So if you buy into my script about growth and the tightening in the labor market - stronger wage growth, that means the Federal Reserve will begin to raise interest rates. And so I do worry about that.
I also worry about what's going on overseas. You know, Europe is close to recession. Japan is in recession. China's growth rates have slowed. And we have a lot of geopolitical risks. It would take a lot of bad things happening overseas to derail what's happening here. But, you know, you can construct those scenarios, and we do need to be focused on that as a risk.
WERTHEIMER: Mark Zandi is the chief economist from Moody's Analytics. Thank you so much for joining us.
ZANDI: Thank you. It was a pleasure.
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