Growth Would Need to Be Unrealistically Large to Pull Nation Out of Unemployment, Housing Crises

Economic growth, in theory, can solve the two most niggling problems facing the country - unemployment and a soft housing market. Growth can lead to more demand, forcing businesses to hire to keep up the supply. Paradoxically, this would lower corporate profits from 2010, where they hoarded cash. Spending that cash would increase overall growth. Similarly, growth would be the biggest cure for the housing sector. It would create more single-domicile families, prevent more foreclosures and defaults, tighten supply and increase demand for housing. While supply is very large right now, after it gets absorbed you would even see new construction and housing starts, which feeds back on job creation. Growth, then, in this reading, is the key indicator. And everyone is predicting economic growth in 2011. That would hold as long as we were talking about spectacular growth, and as long as the economy was not coming out of a Depression-like state. But as Paul Krugman explains, the kind of growth needed - and the current state of the economy - are not in that place right now.

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