U.S. Economics Lesson

"American welfare policy is full employment, not a social welfare state."
          - Richard Freeman and William Rodgers

"The jobless recovery since 2001 has created greater economic problems for Americans than the sluggish job performance of Europe in the 90s created for Europeans," according to Richard Freeman and William Rodgers in their analysis of what has gone wrong with the great American jobs machine. "The United States has only a limited safety net for workers. Those who lose their jobs risk losing healthcare or seeing their family drop from the middle class into poverty. American welfare policy is full employment, not a social welfare state."

Predictably, then, the failure to generate the number of jobs normally associated with an American economic recovery has seen an increase in the number of people living below the breadline. Poverty has risen and there are now 44 million Americans without health insurance.

What may appear puzzling is that this has been accompanied by an increase in the share of the economy accounted for by consumption - which stands at a record level - and by a hefty increase in the trade deficit. If workers are not seeing real incomes rise very much, how come they are spending as though it's going out of fashion?