The End of Recessions in the United States?

By JOEL D. JOSEPH

What happened to the recession that most economists predicted last year? Why is the United States leading the world economy in economic growth while having lower inflation? The answer to both questions is that the United States economy is entering unchartered territory where recessions don’t exist.

There have been 48 recessions in the United States dating back to the Articles of Confederation in 1777. Most economists believe that recessions are a natural and necessary part of every business cycle. However, there are four significant factors, which have all expanded in the past 20 years, that will resist recessions and make them a relic of history.

1. Continually Improving Technology

During the past 20 years technology has been rapidly reshaping the economy. Smartphones have had a significant impact on the economy that is fighting against recessions. For example, smartphone apps, like Uber and Lyft, have become a new safety net for unemployed workers.

In addition, artificial intelligence, robots and the Internet have increased productivity dramatically. A new study commissioned by the Interactive Advertising Bureau (IAB) and led by a researcher from the Harvard Business School, found that the Internet economy grew seven times faster than the total US economy. During the past four years the Intenet economy now accounts for 12% of the US gross domestic product (GDP).

In a national economy that grows between 2 to 3 percent per year, the internet economy’s contribution to the US GDP grew 22% per year since 2016. In 2020 alone, it contributed $2.45 trillion to the United States’ $21.18 trillion GDP. Since the IAB began measuring the economic impact of the Internet in 2008, the Internet’s contribution to GDP has grown eightfold, from $300 billion to $2.45 trillion. The study, “The Economic Impact of the Market-Making Internet – Advertising, Content, Commerce, and Innovation: Contribution to US Employment and GDP,” also discovered that more than 17 million jobs in the US were generated by the Internet, 7 million more than four years ago. More Internet jobs, 38%, were created by small firms and self-employed individuals than by the largest internet companies, which generated 34%.

2. Higher Minimum Wages

California is leading the way with a $20 hourly minimum for fast food workers. “States with a minimum wage of more than $12 an hour saw industrywide employment growth of 25%, compared with only 7% growth in states still using the federal minimum of $7.25. Although there was some variation from state to state, there is a clear trend that states with higher minimum wages have seen more job growth,” AmericanProgress.org reported.

3. The Gig Economy of Uber, Lyft and DoorDash

Uber was founded in 2009. It is based on a smartphone app. The first Apple smartphone was released in 2007. Uber, Lyft and DoorDash could not exist without wide smartphone distribution.

Uber reported that its “earners,” as it calls its drivers and food delivery workers, reached a record high of 5.4 million earners in the fourth quarter of 2022. DoorDash currently has more than 2 million monthly active Dashers, according to Jenn Rosenberg, a company spokesperson. More than 13 million Dashers have used the platform since it launched a decade ago. Flex, a trade association representing DoorDash, Grubhub, HopSkipDrive, Instacart, Lyft, Shipt and Uber, estimates that more than 23 million Americans have earned money through an online platform in the past year.

The Gig economy is a new safety net. Workers who quit or got laid off can often get income by using their smartphone and car to start earning instantly. Gig workers can get income even faster than they could receive unemployment benefits.

4. Immigration

While former President Trump complains about immigration, immigrants have significantly contributed to economic activity in the United States. “Immigrants promote economic growth by moving to areas where businesses are forming or expanding and need more workers. As workers, consumers and entrepreneurs, immigrants promote business dynamism by adding their skills to the labor force, serving as a new group of customers and starting up new businesses,” Forbes magazine reported Feb. 23, 2023. Not only do immigrants repair roads and pick vegetables, they create new businesses. Dov Charney (American Apparel and Los Angeles Apparel), Elon Musk (Tesla and SpaceX) and Andrew Grove (Intel) were all immigrants who created thousands of jobs.

The US economy has chugged along nicely, even with the Federal Reserve trying to slow it down. The economy has not only confounded the Fed, it has economists befuddled. This is all because for the past 20 years we have been creating a new economy based on new technology, the Internet, smartphones and gig workers.

Joel D. Joseph is a lawyer, an economist and author of 15 books, including “Inequality in America: 10 Causes and 10 Cures.”

From The Progressive Populist, May 1, 2024

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