The Economic recovery is in its fifth year, a span that underlines just how choppy it's been. The S&P 500 has reached record highs, while the housing and auto industries are stronger than they've been in years. Still, employment growth in May, as measured by payroll service ADP, was a disappointing 135,000 jobs, and a recent gauge of manufacturing shows that the sector also contracted last month.
According to new research from the Federal Reserve Bank of St. Louis, one reason for the schizophrenic feel is that different socioeconomic groups are experiencing vastly different recoveries. With federal stimulus money long gone and Congress taking money out of the pockets of workers via budget cuts and tax increases, the job of boosting spending and employment has fallen on the Fed. Its massive bond-buying policy has kept interest rates at historic lows. But the benefits of that effort have "disproportionately gone to those who need the least help," according to St. Louis Fed economist William Emmons.
Wealthy homeowners have profited from low rates that make mortgages cheaper and nudge stock values higher. But many of the folks hit hardest by the crisis have been unable to modify their mortgages because of high debt loads. Nor have they benefited from rising equity prices, because rates of participation in the stock market are at 15-year lows. That's a recipe for stagnation for the less well off. The economy will continue to convalesce, says Mark Zandi, chief economist for Moody's Analytics, "but it won't feel like we're in top gear, because a large part of the population is still struggling financially."