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 wih a number o problems including large household deb;lingering wealh losses; scal challenges or sae, local, and ederal governmens; andoverseas economic crises. Job and economic growh are sluggish as a resul.Policymakers have ools ha can accelerae boh job creaion and economic expan-sion—hey jus need o use hem. Tey aced decisively in he pas wih exended unem-ploymen insurance benes, payroll ax cus, and inrasrucure invesmens when hey had a sense o urgency abou helping America’s sruggling middle class and srenghen-ing he recovery. Tere’s no reason hey shouldn’ have ha urgency now.Policymakers’ op concern should be susained and aser job creaion. Tey can also boos household incomes hrough exended unemploymen insurance benes, higherminimum wages, and more opporuniies or employees o join a union. In addiion,policymakers need o ocus on helping households build wealh aser hrough measuresha srenghen 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 domesic produc, or GDP,grew a an annual rae o 1.9 percen in he rs quarer o 2012. Governmen spend-ing acually ell by 4 percen and business invesmen grew a a modes pace o 3.1percen in he rs quarer o 2012, while consumpion grew by 2.5 percen andexpors expanded a a srong 4.2 percen growh rae.
1
Governmen spending cusreec he coninued scal crisis among ederal, sae, and local governmens anddeclining business invesmen. Te slow pace o business invesmen may reec businesses’ uncerainy abou he economic and scal oulook.
2
2.
Competitiveness falls back.
Worker produciviy—he amoun o goods andservices produced in an hour o work in he nonarm business economy—is a key measure o he economy’s global compeiiveness. I decreased by 0.9 percen in hers quarer o 2012. Produciviy now sands 6.8 percen larger han in December
2Center or American Progress | Economic Snapshot or July 2012
2007, a he sar o he Grea Recession, bu well below he average increase o 9.3percen or similar periods in he pas.
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3.
The slow labor market recovery continues.
Tere were 2.6 million more jobs in June2012 han in June 2009, when he economic recovery ocially sared. Te privaesecor added 3.2 million jobs during his period. Te dierence beween he ne gainand privae-secor gain is explained by he loss o 618,000 sae and local govern-men jobs, as budge cus reduced he number o eachers, bus drivers, reghers,and police ocers, among ohers.
4
Job creaion is a op policy prioriy since privae-secor job growh is sill oo weak o overcome oher job losses quickly and o lowerhe unemploymen rae rapidly.4.
Unemployment stays high.
Te unemploymen rae sood a 8.2 percen in June2012. Long-erm unemploymen has also ballooned in recen years alongside highunemploymen raes. In June 2012, 41.9 percen o he unemployed were ou o work and looking or a job or more han six monhs. Te average lengh o unemploymensayed high wih 39.9 weeks in June 2012.
5
Tose ou o a job or a long ime sruggle because job growh has proceeded a a slow place. Millions o unemployed workers hence vie or he newly creaed jobs.5.
Labor market pressures fall especially on com-munities of color, young workers, and thosewith less education.
Te Arican Americanunemploymen rae in June 2012 sayed wellabove average a 14.4 percen, he Hispanicunemploymen rae was 11 percen, and he whie unemploymen rae was 7.4 percen. Youh unemploymen sood a a high 23.7percen. And he unemploymen rae or people wihou a high school diploma sayed higha 12.6 percen, compared o 8.4 percen orhose wih a high school diploma, 7.5 percenor hose wih some college educaion, and 4.1percen or hose wih a college degree.
6
Vulnerable groups have sruggled dispro-porionaely more amid he weak labor marke han whie workers, older workers,and workers wih more educaion.6.
Household incomes continue to drop amid prolonged labor market weaknesses.
Median inaion-adjused household income—hal o all households have moreand he oher hal has less—sood a $49,445 in 2010, is lowes level in inaion-
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
adjused dollars since 1996. I ell again by 2.3 percen in 2010, an acceleraeddecline afer median income dropped by 0.7 percen in 2009. American amiliessaw ew gains during he recovery beore he crisis hi in 2008 and experienced noincome gains during he curren economic recovery afer 2009.
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7.
Income inequality is on the rise.
Households a he 95h percenile, wih incomes o $180,810 in 2010, had incomes more han nine imes—9.04 imes, o be exac—heincomes o households a he 20h percenile, which had incomes o $20,000. Tis ishe larges gap beween he op 5 percen and he botom 20 percen o householdssince he U.S. Census Bureau kep record in 1967.
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8.
Poverty continues to rise across a wide spectrum.
Te povery rae rose o 15.1percen in 2010—is highes rae since 1993. Te Arican American povery rae was27.4 percen, he Hispanic rae was 26.6 percen, and he whie rae was 9.9 percenin 2010. Te povery rae or children under he age o 18 sood a 22 percen. Morehan one-hird o Arican American children (39.1 percen) lived in povery in 2010compared o 35 percen o Hispanic children and 12.4 percen o whie children.
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Te prolonged economic slump, ollowing an excepionally weak labor marke beore he crisis, has aken a massive oll on he mos vulnerable.9.
Employer-sponsored benefits disappear.
Teshare o people wih employer-sponsoredhealh insurance dropped rom 59.8 percenin 2007 o 55.3 percen in 2010.
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Te share o privae-secor workers who paricipaed in areiremen plan a work ell o 39.5 percen in2010, down rom 42 percen in 2007.
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Familieshave less economic securiy han in he pas dueo ewer employmen-based benes, requiringmore privae savings o make up he dierence.10.
Family wealth losses linger.
oal amily wealhis down $10.9 rillion (in 2012 dollars) romis las peak in June 2007 o March 2012. Andhomeowners on average own a near-record low o only 40.7 percen o heir homes, wih heres owed o banks.
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Homeowners eel pressureo save more and consume less o rebuild heirequiy, slowing consumer spending and holding back economic growh.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 Sepember 2007.
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Te unprecedened all in deb over he pas our years resuled 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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Economic Snapshot for July 2012
Slow job growth and lingering wealth losses should be at the top of lawmakers’ minds, writes Christian E. Weller.
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