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Economic Snapshot for July 2012

Economic Snapshot for July 2012

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Slow job growth and lingering wealth losses should be at the top of lawmakers’ minds, writes Christian E. Weller.
Slow job growth and lingering wealth losses should be at the top of lawmakers’ minds, writes Christian E. Weller.

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Published by: Center for American Progress on Jul 13, 2012
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1Center or American Progress | Economic Snapshot or July 2012
Economic Snapshot for July 2012
Christian E. Weller on the State of the Economy
Christian E. Weller, associate professor, Department of Public Policy and Public Affairs,University of Massachusetts Boston, and Senior Fellow, Center for American ProgressJuly 2012
Te U.S. economy is dealing wih a number o problems including large household deb;lingering wealh losses; scal challenges or sae, local, and ederal governmens; andoverseas economic crises. Job and economic growh are sluggish as a resul.Policymakers have ools ha can accelerae boh job creaion and economic expan-sion—hey jus need o use hem. Tey aced decisively in he pas wih exended unem-ploymen insurance benes, payroll ax cus, and inrasrucure invesmens when hey had a sense o urgency abou helping America’s sruggling middle class and srenghen-ing he recovery. Tere’s no reason hey shouldn’ have ha urgency now.Policymakers’ op concern should be susained and aser job creaion. Tey can also boos household incomes hrough exended unemploymen insurance benes, higherminimum wages, and more opporuniies or employees o join a union. In addiion,policymakers need o ocus on helping households build wealh aser hrough measuresha srenghen he housing marke, help households save more money, and allow ami-lies o lower heir deb burden.1.
Economic growth remains positive but modest.
Gross domesic produc, or GDP,grew a an annual rae o 1.9 percen in he rs quarer o 2012. Governmen spend-ing acually ell by 4 percen and business invesmen grew a a modes pace o 3.1percen in he rs quarer o 2012, while consumpion grew by 2.5 percen andexpors expanded a a srong 4.2 percen growh rae.
1
Governmen spending cusreec he coninued scal crisis among ederal, sae, and local governmens anddeclining business invesmen. Te slow pace o business invesmen may reec businesses’ uncerainy abou he economic and scal oulook.
2
 2.
Competitiveness falls back.
 Worker produciviy—he amoun o goods andservices produced in an hour o work in he nonarm business economy—is a key measure o he economy’s global compeiiveness. I decreased by 0.9 percen in hers quarer o 2012. Produciviy now sands 6.8 percen larger han in December
 
2Center or American Progress | Economic Snapshot or July 2012
2007, a he sar o he Grea Recession, bu well below he average increase o 9.3percen or similar periods in he pas.
3
 3.
The slow labor market recovery continues.
Tere were 2.6 million more jobs in June2012 han in June 2009, when he economic recovery ocially sared. Te privaesecor added 3.2 million jobs during his period. Te dierence beween he ne gainand privae-secor gain is explained by he loss o 618,000 sae and local govern-men jobs, as budge cus reduced he number o eachers, bus drivers, reghers,and police ocers, among ohers.
4
Job creaion is a op policy prioriy since privae-secor job growh is sill oo weak o overcome oher job losses quickly and o lowerhe unemploymen rae rapidly.4.
Unemployment stays high.
Te unemploymen rae sood a 8.2 percen in June2012. Long-erm unemploymen has also ballooned in recen years alongside highunemploymen raes. In June 2012, 41.9 percen o he unemployed were ou o  work and looking or a job or more han six monhs. Te average lengh o unemploymensayed high wih 39.9 weeks in June 2012.
5
 Tose ou o a job or a long ime sruggle because job growh has proceeded a a slow place. Millions o unemployed workers hence vie or he newly creaed jobs.5.
Labor market pressures fall especially on com-munities of color, young workers, and thosewith less education.
Te Arican Americanunemploymen rae in June 2012 sayed wellabove average a 14.4 percen, he Hispanicunemploymen rae was 11 percen, and he whie unemploymen rae was 7.4 percen. Youh unemploymen sood a a high 23.7percen. And he unemploymen rae or people wihou a high school diploma sayed higha 12.6 percen, compared o 8.4 percen orhose wih a high school diploma, 7.5 percenor hose wih some college educaion, and 4.1percen or hose wih a college degree.
6
Vulnerable groups have sruggled dispro-porionaely more amid he weak labor marke han whie workers, older workers,and workers wih more educaion.6.
Household incomes continue to drop amid prolonged labor market weaknesses.
Median inaion-adjused household income—hal o all households have moreand he oher hal has less—sood a $49,445 in 2010, is lowes level in inaion-
Figure 1
Share of long-term unemployment, business cycle averages
Source: Bureau of Labor Statistics, Current Population Survey (Department of Labor, 2011).
Average weeks of unemploymentBusiness cycle start
6.8%9.0%13.8%10.4%9.0%12.3%14.8%15.9%18.7%35.3%0%5%10%15%20%25%30%35%40%
Dec-48 Aug-53 Sep-57 May-60 Jan-70 Dec-73 Feb-80 Aug-90 Mar-01 Dec-07
 
3Center or American Progress | Economic Snapshot or July 2012
adjused dollars since 1996. I ell again by 2.3 percen in 2010, an acceleraeddecline afer median income dropped by 0.7 percen in 2009. American amiliessaw ew gains during he recovery beore he crisis hi in 2008 and experienced noincome gains during he curren economic recovery afer 2009.
7
7.
Income inequality is on the rise.
Households a he 95h percenile, wih incomes o $180,810 in 2010, had incomes more han nine imes—9.04 imes, o be exac—heincomes o households a he 20h percenile, which had incomes o $20,000. Tis ishe larges gap beween he op 5 percen and he botom 20 percen o householdssince he U.S. Census Bureau kep record in 1967.
8
 8.
Poverty continues to rise across a wide spectrum.
Te povery rae rose o 15.1percen in 2010—is highes rae since 1993. Te Arican American povery rae was27.4 percen, he Hispanic rae was 26.6 percen, and he whie rae was 9.9 percenin 2010. Te povery rae or children under he age o 18 sood a 22 percen. Morehan one-hird o Arican American children (39.1 percen) lived in povery in 2010compared o 35 percen o Hispanic children and 12.4 percen o whie children.
9
 Te prolonged economic slump, ollowing an excepionally weak labor marke beore he crisis, has aken a massive oll on he mos vulnerable.9.
Employer-sponsored benefits disappear.
Teshare o people wih employer-sponsoredhealh insurance dropped rom 59.8 percenin 2007 o 55.3 percen in 2010.
10
Te share o privae-secor workers who paricipaed in areiremen plan a work ell o 39.5 percen in2010, down rom 42 percen in 2007.
11
Familieshave less economic securiy han in he pas dueo ewer employmen-based benes, requiringmore privae savings o make up he dierence.10.
Family wealth losses linger.
oal amily wealhis down $10.9 rillion (in 2012 dollars) romis las peak in June 2007 o March 2012. Andhomeowners on average own a near-record low o only 40.7 percen o heir homes, wih heres owed o banks.
12
Homeowners eel pressureo save more and consume less o rebuild heirequiy, slowing consumer spending and holding back economic growh.11.
Household debt is still high.
Household deb equaled 109.2 percen o afer-ax income in March 2012, down rom a peak o 129.1 percen in Sepember 2007.
13
 Te unprecedened all in deb over he pas our years resuled rom igh lend-
Figure 2
Household debt to after-tax income, 1952 to 2011
Source: Calculations based on Board of Governors, Federal Reserve, 2011, Flow of Funds Accounts of the UnitedStates, Washington, D.C.: BOG.
   M  a  r  -   5   2   M  a  r  -  6   7   M  a  r  -   8   2   M  a  r  -   9   7   M  a  r  -   1   2
Percent of after-tax income
0%20%40%60%80%100%120%
140%

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