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Back to basics

It could easily fall again; states are not going to be quick to spend the revenues now starting to return. In Texas, where sales-tax revenues are running $1 billion ahead of projections, the governor, Rick Perry, has rejected calls to reverse education cuts. And the real-estate crash will reverberate for years through municipal coffers as property assessments and collections catch up with the collapse in values. Last month Stockton in California suspended paying interest on some bonds; it may become the biggest municipal bankruptcy ever. Meanwhile, federal stimulus is steadily giving way to restraint. More drastic tightening looms at the end of the year if George Bush's tax cuts, already extended once, expire, and a “sequester” automatically slashes federal outlays.

Beneath all this, America's economy is slowly rebalancing itself. After living beyond its means for more than two decades, America needs to export and invest more. Changes in prices are one of the mechanisms that make that happen. Just as lower property values drive capital and labour away from housing, a lower dollar draws them to exports and industries that compete with imports.

Years of high oil prices are driving up fuel efficiency. They have also stimulated domestic supply, in particular from unconventional sources like North Dakota's Bakken formation. As a result America is importing, net, 9m barrels of oil a day, compared with 10m in 2008.

Domestic oil and gas production have played a part in the recovery of manufacturing by spurring related exports. Although a net importer of crude oil, America was last year a net exporter of energy products such as petrol. Cheap shale gas has revived the petrochemical industry, which uses it to make ethylene—which in turn is used in everything from grocery bags to bottles and tyres. The American Chemistry Council, an industry group, reckons shale gas could generate 17,000 jobs directly in the petrochemical industry, and many more indirectly.

Manufacturing employment, which declined almost continuously from 1998 through 2009, has since risen by nearly 4%, and the average length of time factories work is as high as at any time since 1945. Since the end of the recession exports have risen by 39%, much faster than overall GDP. Neither is as impressive as it sounds: manufacturing employment remains a smaller share of the private workforce than in 2007, and imports have recently grown even faster than exports as global growth has faltered and the dollar has climbed. Trade, which was a contributor to economic growth in the first years of recovery, has lately been a drag.

But economic recovery doesn't have to wait for all of America's imbalances to be corrected. It only needs the process to advance far enough for the normal cyclical forces of employment, income and spending to take hold. And though their grip may be tenuous, and a shock might yet dislodge it, it now seems that, at last, they have.

Comprehension questions

1. What are the obstacles to American recovery?

2. Why is American recovery so slow?

3. In what way is US economy rebalancing itself?

Vocabulary