We are drifting. We take comfort in bits of good news, but we are in dangerous waters; the Great Recession is being starkly revealed as a global crisis with the US, the traditional engine of recovery, sputtering on every cylinder. The US government responded with dramatic financial support by transferring money to the household sector. But outside of these transfers the personal income of Americans is still declining; the residential market remains stagnant at best; consumer growth is nominal. The only real energy in the economy has come from the cessation of inventory liquidation, which is now the main factor in rising industrial output and any modest improvement in the economy.

The mood of US households is despondent. In May only 11.3 per cent believed they would see their income rise in the following six months, while 16.6 per cent thought they would see it decline. This is the first time in over four decades that more people believe they will be worse off than better. Any massive fiscal and monetary stimulus that might reverse the trend is likely to be politically unsustainable given the growing concern over the exploding national deficit.

Wherever you look the scene is bleak. Leading economic indicators fell in April – unusual at such an early stage in the up-cycle. Jobless claims were up by 25,000 to 471,000. And up again above expectations in the first three weeks of May – raising the four-week moving average to a level consistent with 100,000, or more, net job losses. For the past several months, claims have been nowhere near the levels of 400,000 and less that in the past were consistent with sustained job creation. We are not enjoying the normal cycle of economic improvement. If we were, employment would already have reached a new high and made up all of the jobs lost, as it did during the previous postwar recessions. This time we remain short of the old peak of employment, by an astounding 8.4m jobs. One in six Americans is either unemployed or underemployed. This is not a normal cycle when compared with a typical recession, which sees no more than 2m to 3m jobs lost.