More than five years after the "official" end of the Great Recession in the United States, the Federal Reserve's [1] vice chair says there are still too many hurdles blocking the country from getting back on its feet.
Speaking at a conference [2] in Sweden Monday morning, Stanley Fischer, vice chairman of the Fed and former governor of the Bank of Israel, admitted that the global recovery from the recession has been disappointing at best, noting that economic growth among the world's most advanced economies has underperformed compared to previous post-recessionary periods.
"Year after year we have had to explain from mid-year on why the global growth rate has been lower than predicted as little as two quarters back," Fischer said.
Indeed, a recent survey of economists [3] conducted by the Wall Street Journal showed significantly less optimistic forecasts for the United States compared to predictions made earlier in the year. The panel's lower expectations were brought on by a subdued housing sector, which has seen sluggish construction and sales activity so far this year.
Like the economists in the Wall Street Journal survey, Fischer said the housing market has been a sore spot for the country.
"The housing sector was at the epicenter of the U.S. financial crisis and recession and it continues to weigh on the recovery," Fischer told the audience.
While economic recoveries have historically been marked by rebounds in housing activity, construction in the last few years has been held back by a large inventory of foreclosed and distressed properties and by tight credit conditions, both for construction and mortgage loans, Fischer said.
On top of that, the decline in home equity and the inability of underwater borrowers to refinance their mortgages into historically low rates has reduced household demand for other goods and services.
What's more, the United States isn't alone in its housing struggles, Fischer said: "Growth in other countries that experienced financial crises, including the United Kingdom, Ireland, and Spain, has been weighed down by struggling residential sectors."
Adding to the problem are fiscal policies that the Fed vice chair says have actually hampered any progress made rather than helping it.
In the United States alone, the economy has taken hits from the end of the payroll tax cut, the start of sequestration, budget caps limiting discretionary spending, and last year's government shutdown, all of which have contributed to a slowdown of about 1.5 percentage points in economic growth.