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Economic Snapshot: March 2014

Economic Snapshot: March 2014

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Progressive fiscal policy must complement monetary policy to boost economic growth.
Progressive fiscal policy must complement monetary policy to boost economic growth.

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Published by: Center for American Progress on Mar 25, 2014
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1 Center for American Progress | Economic Snapshot: March 2014
Economic Snapshot: March 2014
Christian E. Weller on the State of the Economy
By Christian E. Weller and Sam Ungar March 26, 2014
Te economic daa or March sugges a pressing need or policy atenion on economic growh and he labor marke. Te economy and he labor marke coninue o grow a a modes pace wih he resul ha many people are financially sruggling, even as he economic recovery ha sared in June 2009 is closing in on compleing is fifh year.  A range o new policies are necessary o boos economic growh and employmen. Macroeconomic policy since 2012 has resed largely wih moneary policy. Te Federal Reserve has kep shor-erm ineres raes low and underaken a series o unprecedened  bond purchases o sabilize major credi markes such as morgage markes. Bu low ineres raes alone have no been enough o creae a robus economic recovery wih quickly rising incomes and employmen. A number o addiional policies󲀔such as invesmens in inrasrucure and educaion, exended unemploymen benefis, and a higher minimum wage󲀔are necessary o boos economic and job growh. Such policies are also gaining added imporance as he Federal Reserve is gradually preparing o ighen moneary policy  wih higher ineres raes and ewer bond pur-chases. Tis leaves a void ha needs o be filled agains he backdrop o a subpar economic recov-ery ha has benefied in large par only upper income households and corporae profis.
1.
Economic growth lags behind previous recoveries.
Gross domesic produc, or GDP, increased in he ourh quarer o 2013 a an inflaion-adjused annual rae o 2.4 percen. Domesic consumpion increased by an annual rae o 2.6 percen, and housing spending sub-sanially shrank by 8.7 percen, while business invesmen growh grew a a rae o 7.3 percen. Expors increased by 9.4 percen in he firs
FIGURE 1
GDP growth in recovery in comparison to previous recoveries
90120125130115110105100950123456789101112131415161718
    G   r   o   w    t    h    i   n    d   e   x    (    l   a   s    t   q   u   a   r    t   e   r   o    f   r   e   c   e   s   s    i   o   n   =    1    0    0    )
Mar ’61Mar ’75Dec ’82Mar ’91Dec ’01Jun ’09Number of quarters of economic recoveryRecovery after the Great Recession
Source: Authors’ calculations based on Bureau of Economic Analysis,
National Income and Product Accounts
 (U.S. Department of Commerce, 2014). Calculations only done for recoveries that have lasted at least four years.
 
2 Center for American Progress | Economic Snapshot: March 2014
quarer, and governmen spending decreased by 5.6 percen.
1
 Te economy expanded  by 11 percen rom June 2009 o December 2013󲀔is slowes expansion during recoveries o a leas equal lengh.
2
 Policymakers need o ocus on srenghening key pars o economic growh, paricularly invesmen and expors, wih argeed mea-sures ha go beyond removing fiscal uncerainy.
2. Improvements to U.S. competitiveness lag behind previous business cycles.
Produciviy growh, measured as he increase in inflaion-adjused oupu per hour, is key o increasing living sandards. U.S. produciviy rose by 7.3 percen rom June 2009 o December 2013, he firs 18 quarers o he economic recovery since he end o he Grea Recession.
3
 Tis compares o an average o 11.9 percen during all previ-ous recoveries o a leas equal lengh.
4
 No previous recovery had lower produciviy growh han he curren one. Produciviy growh is he main driving orce behind he counrys abiliy o raise living sandards. Weaker produciviy growh han in he pas will make i harder o build a srong middle class, requiring policymakers’ aten-ion o inves in U.S. compeiiveness.
3.
The housing market continues to recover from historic lows.
New-home sales amouned o an annual rae o 468,000 in January 2014󲀔a 2.2 percen increase rom he 458,000 homes sold in January 2013 bu well below he hisorical average o 698,000 homes sold beore he Grea Recession.
5
 Te median new-home price in January 2014 was $260,100, up rom one year earlier.
6
 
Exising-home sales were down by 7.1 percen in February 2014 rom one year earlier, bu he median price or exising homes was up by 9.1 percen during he same period.
7
 Home sales have o go a lo urher, given ha homeownership in he Unied Saes sood a 65.2 percen in he ourh quarer o 2013, down rom 68.2 percen beore he recession. Te curren homeownership raes are similar o hose recorded in 1996, well beore he mos recen housing bubble sared.
8
 
 Alhough he housing-marke recovery sared laer han he wider economic recovery󲀔and sared ou a a record low󲀔he housing marke has laely conribued a much-needed boos o economic progress. As such, here is sill pleny o room or he housing marke o provide more simulaion o he economy more broadly. Te fledgling housing recovery could gain urher srengh i policymakers suppor economic growh and job creaion a he same ime.
4.
Moderate labor-market recovery shows less job growth than in previous recoveries.
Tere were 6.8 million more jobs in February 2013 han in June 2009. Te privae secor added 7.5 million jobs during his period. Te loss o nearly 630,000 sae and local governmen jobs explains he difference beween he ne gain o all jobs and he privae-secor gain in his period. Budge cus reduced he number o eachers, bus drivers, firefighers, and police officers, among ohers.
9
 Te oal number o jobs has now grown by 5.2 percen during his recovery, compared o an average o 12.3 per-cen during all prior recoveries o a leas equal lengh.
10
 Tose looking or jobs sill need assisance such as exended unemploymen insurance benefis.
 
3 Center for American Progress | Economic Snapshot: March 2014
FIGURE 2
Employment-to-population ratio for 25–54 year-olds, 1947–2013
5.
Employment opportunities grow very slowly for people in their prime earning years.
Te employed share o he populaion rom ages 25 o 54󲀔which is unaffeced by he aging o he overall populaion󲀔was 76.5 percen in February 2014. Tis was jus above he level recorded in June 2009 and well below he levels recorded since he mid-1980s and beore he Grea Recession sared in 2007. Te employed share o he populaion has, on average, grown  by 3.6 percenage poins a his sage during previous recoveries o a leas equal lengh.
11
 Specifically, here has been insufficien job growh o creae real economic opporuniies or people in he mids o heir main earning  years󲀔years when hey need hose opporuni-ies he mos.
6.
Employer-sponsored benefits disappear.
 
Te share o people wih employer-sponsored healh insurance dropped rom 59.8 percen in 2007 o 54.9 percen in 2012, he mos recen year or which daa are available.
12
 Te share o privae-secor workers who paricipaed in a reiremen plan a work ell o 39.4 percen in 2012, down rom 41.5 percen in 2007.
13
 Families now have less economic securiy han in he pas due o ewer employmen-based benefis, which requires hem o have more privae savings o make up he difference.
7.
Some communities continue to struggle disproportionately from unemploy-ment.
Te unemploymen rae sood a 6.7 percen in February 2014: Te Arican  American unemploymen rae was 12 percen; he Hispanic unemploymen rae was 8.1 percen; and he whie unemploymen rae was 5.8 percen. Meanwhile, youh unemploymen sood a 21.4 percen. Te unemploymen rae or people wihou a high school diploma icked back up o 9.8 percen, compared o 6.4 percen or hose  wih a high school degree, 6.2 percen or hose wih some college educaion, and 3.4 percen or hose wih a college degree.
14
 Populaion groups wih higher unemploy-men raes have sruggled disproporionaely more amid he weak labor marke han  whie workers, older workers, and workers wih more educaion.
8.
The rich continue to pull away from most Americans.
 
Incomes o households in he 95h percenile󲀔hose wih incomes o $191,000 in 2012, he mos recen year or  which daa are available󲀔were more han nine imes he incomes o households in he 20h percenile, whose incomes were $20,599. Tis is he larges gap beween he
60%80%
   1   9  4   8   1   9   5   3   1   9   5   8   1   9  6   3   1   9  6   8   1   9   7   3   1   9   7   8   1   9   8   3   1   9   8   8   1   9   9   3   1   9   9   8   2  0  0   3   2  0  0   8   2  0   1   3
65%70%75%85%
    S    h   a   r   e   o    f   p   o   p   u    l   a    t    i   o   n     (    i   n    p   e   r   c   e   n    t    )
Source: Bureau of Labor Statistics,
Current Population Survey 
 (U.S. Department of Labor, 2014).

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