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Economic Snapshot: February 2013

Economic Snapshot: February 2013

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Policymakers can accelerate modest recovery with increased infrastructure investments and boosts to personal income.
Policymakers can accelerate modest recovery with increased infrastructure investments and boosts to personal income.

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Published by: Center for American Progress on Feb 21, 2013
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1Center or American Progress | Economic Snapshot or February 2013
Economic Snapshot for February 2013
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 ProgressFebruary 2013
Economic growh and job creaion coninue a a modes pace in he ourh year o heeconomic recovery rom he Grea Recession. Te privae secor and he labor markehave coninued o expand during much o he recovery despie massive obsacles,such as he lingering European nancial crisis, high U.S. household deb levels, andlarge-scale scal uncerainy in he Unied Saes. Tere is subsanial room or heU.S. economy and labor marke o gain srengh i policymakers pursue a number o key seps in he shor run.Now ha Congress has resolved some o he scal mess ha creaed our massive eco-nomic uncerainy, policymakers can inves in inrasrucure, oseting weak businessinvesmen and expor growh; boos personal incomes wih a minimum-wage increaseo bolser consumpion; and help households ease he sill-high burden o deb hroughaciliaing higher personal incomes and he renancing o exising morgages.1.
Economic growth slowed markedly at the end of 2012.
Gross domesic produc,or GDP, was essenially a, alling slighly a an annual rae o 0.1 percen in heourh quarer o 2012. Domesic consumpion increased by an inaion-adjusedannual rae o 2.2 percen, housing spending grew by 15.3 percen, and businessinvesmen acceleraed by 8.4 percen. In he ourh quarer o 2012, however,expors ell by 5.7 percen, and governmen spending shrank by 6.6 percen.
1
 Tereore, policy should ease he srain o scal auseriy on he economy by dampening spending cus, and i should boos domesic privae-secor economicaciviy o ose he all-o in overseas demand.2.
The moderate labor market recovery continues in its fourth year.
Tere were 4.3million more jobs in January 2013 han in June 2009, when he economic recovery ocially sared. Te privae secor added 5 million jobs during his period. Tedierence beween he ne gain and he privae-secor gain is explained by he losso nearly 697,000 sae and local governmen jobs in his period, as budge cusreduced he number o eachers, bus drivers, reghers, and police ocers, among
 
2Center or American Progress | Economic Snapshot or February 2013
FIGURE 1
Monthly job change since start of Great Recession in 2008
Source: Bureau of Labor Statistics,
Current Employment Statistics
(Department of Labor, 2012).
Job changes (in thousands)
January2008July2008January2009July2009January2010July2010January2011July2011January2012July2012-1,000-800-600-400-2000200400600
ohers.
2
Job creaion is a op policy prioriy since privae-secor job growh is silloo weak o quickly overcome oher job losses and rapidly lower he unemploymenrae. Once again, removing he uncerainy over scal changes is a key sep owardsrenghening economic and job growh.3.
Long-term unemployment slowly improves.
Te unemploymen rae sood a 7.9percen in January 2013. And long-erm unemploymen—dened as hose peopleou o work and looking or a job or more han six monhs—slowly edged down. In January 2013, 38.1 percen o he unemployed were considered long-erm unem-ployed—he lowes share since Ocober 2009. Te average lengh o unemploy-men also coninued o drop in January 2013, alling o a sill relaively high 35.3 weeks—he lowes level, noneheless, since December 2010.
3
Tose ou o a job ora long ime sruggle o regain employmen because heir skills arophy and re-enry ino a new job becomes increasingly harder.Te coninuaion o exended unemploymeninsurance benes as par o he resoluion ohe scal showdown on January 1, 2013, washus a welcome policy ha helped many o hose mos vulnerable o economic shocks.4.
Labor-market troubles fall especially hard oncommunities of color, young workers, andthose Americans with less education.
Te Arican American unemploymen rae in January 2013 was a high 13.8 percen; heHispanic unemploymen rae was 9.7 per-cen; and he whie unemploymen rae was7 percen. Youh unemploymen sood a ahigh 23.4 percen. Te unemploymen rae orpeople wihou a high school diploma sayedhigh a 12 percen, compared o 8.1 percenor hose wih a high school degree, 7 percenor hose wih some college educaion, and 3.7percen or hose wih a college degree.
4
Tese populaion groups—which ypi-cally have low incomes and litle wealh—have sruggled disproporionaely moreamid he weak labor marke han whie workers, older workers, and workers wihmore educaion, creaing greaer need or progressive policy acions o srenghen job creaion or everybody.5.
Household incomes continue to drop amid prolonged weaknesses in the labormarket.
Median inaion-adjused household income—hal o all households havemore, and he oher hal has less—sood a $50,054 in 2011, is lowes level in ina-ion-adjused dollars since 1995. Median income ell by 1.5 percen in 2011, drop-
 
3Center or American Progress | Economic Snapshot or February 2013
ping or he ourh year in a row. American amilies have experienced no incomegains during he curren economic recovery since 2009, exacerbaing he losses haoccurred during he Grea Recession.
5
6.
Income inequality on the rise.
Households a he 95h percenile, wih incomeso $186,000 in 2011, had incomes ha were more han nine imes—9.2 imes, o be exac—he incomes o households a he 20h percenile, whose incomes were$20,262. Tis is he larges gap beween he op 5 percen and he botom 20 per-cen o households since he U.S. Census Bureau sared keeping record in 1967.
6
7.
Poverty stays high.
Te povery rae ell o 15 percen in 2011, down rom 15.1 per-cen in 2010. Te Arican American povery rae was 27.6 percen, he Hispanic rae was 25.3 percen, and he whie rae was 9.8 percen. Te povery rae or childrenunder he age o 18 sood a 21.9 percen. More han one-hird o Arican Americanchildren—38.8 percen—lived in povery in 2011, compared o 34.1 percen o Hispanic children and 12.5 percen o whie children.
7
Te prolonged economicslump, ollowing an excepionally weak labor marke beore he crisis, has aken amassive oll on he mos vulnerable.8.
Employer-sponsored benefits disappear.
Te share o people wih employer-spon-sored healh insurance dropped rom 59.8 percen in 2007 o 55.1 percen in 2011.
8
 Te share o privae-secor workers who paricipaed in a reiremen plan a work ello 39.2 percen in 2011, down rom 42 percen in 2007.
9
Families have less eco-nomic securiy han in he pas due o ewer employmen-based benes, requiringmore privae savings o make up he dierence.9.
Family wealth losses linger.
oal amily wealh is down $9.1 rillion (in 2012dollars) rom March 2007—is las peak—o Sepember 2012. Homeowners onaverage own only 44.8 percen o heir homes—compared o he long-erm aver-age o 61 percen beore he Grea Recession—wih he res owed o banks.
10
 Homeowners sill have a lo o deb. Tis slows consumpion growh, as householdssill do no have a lo o collaeral or banks o loosen heir lending sandards.10.
Household debt is still high.
Household deb equaled 107.7 percen o afer-ax income in Sepember 2012, down rom a peak o 126 percen in March 2007.
11
Teunprecedened all in deb over he pas ew years has resuled rom igh lend-ing sandards, alling ineres raes, massive oreclosures, and increased householdsaving. Bu urher deleveraging will likely slow unless incomes rise aser han hey have in he pas, since mos acors ha have helped reduce household deb in hepas have slowed or disappeared, such as alling ineres raes and he payroll ax holiday. Tis high deb could coninue o slow economic growh, as householdsocus on saving raher han on spending more.

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