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Economic Snapshot for August 2011

Economic Snapshot for August 2011

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Policymakers have a tough task ahead of balancing economic growth with deficit reduction, writes Christian E. Weller. But it’s not an impossible task.
Policymakers have a tough task ahead of balancing economic growth with deficit reduction, writes Christian E. Weller. But it’s not an impossible task.

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Published by: Center for American Progress on Aug 29, 2011
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1Cente o Amecan Poess | Economc Snapshot o Ast 2011
Economic Snapshot for August 2011
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 ProgressAugust 2011
Economic policy discussions remain ron and cener. Policymakers need osrenghen he weak recovery so ha aser employmen gains will become largeenough o subsanially lower he unemploymen rae. Policy also needs o lay heoundaion or sronger long-erm growh as he U.S. economy is sruggling wihlow business invesmen and comparaively weak produciviy growh. A hesame ime, ederal policymakers need o consider seps o lower he long-erm s-cal decis wihou impeding economic growh and job creaion in he shor runand long erm.Sriking a balance beween job growh, long-erm produciviy gains, and decireducion is a all order bu no an impossible challenge. I is, however, no aproblem ha lends isel o ideological rheoric bu raher requires houghuldiscussion and respecul compromise among all sakeholders. Te so-called“super commitee,” a congressional biparisan 12-member eam charged wihnding ways o lower he ederal deci by $1.5 rillion over he nex decade by Tanksgiving, presens an opporuniy o pu job growh, innovaion, and long-erm economic prosperiy a he op o he agenda in Washingon.
1. Economic growth remains low.
Gross domesic produc, or GDP, grew a anannual rae o 1.3 percen in he second quarer o 2011—he eighh quarero posiive growh in a row. Te economy expanded by 5.0 percen in inaion-adjused erms during he rs eigh quarers o he recovery, which is heslowes growh in he rs eigh quarers o an economic recovery since World War II. Business invesmen expanded a a reasonable 6.3 percen and exporsa 6.0 percen in he second quarer o 2011, while consumpion was almosa, expanding a only 0.1 percen, wih governmen spending alling by 1.1percen.
Economic growh is slowed in paricular because o weak consumerdemand as amilies sruggle under a weak labor marke and high deb levels.
2Cente o Amecan Poess | Economc Snapshot o Jly 2011
2. The trade deficit stays high as imports outpace exports.
Te U.S. rade decisood a 3.9 percen o GDP in he second quarer o 2011, up rom is lasrough o 2.4 percen o GDP in he second quarer o 2009 and he largesdeci since he end o 2008.
Te solid U.S. expor perormance o he pasew years is no enough o overcome even larger impor increases, which pusmore pressure on oher pars o he economy—consumpion chie amonghem—o move he economy orward o aser growh.
3. The labor market recovery slows.
Te U.S.economy coninuously added privae-secor jobs rom February 2010 o July 2011 or aoal o 2.4 million jobs. Job growh slowedsubsanially in May, June, and July 2011,adding only 111,000 per monh, down roman average o more han 240,000 jobs permonh beween January and April 2011.Privae-secor job growh also was ose by aloss o 402,000 public-secor jobs a he saeand local level beween February 2010 and July 2011,
reecing he budge roubles o sae and local governmens.
SEE igurE 1
4. Unemployment stays high amid weak jobgrowth.
Te unemploymen rae sood a 9.1percen in July 2011. Long-erm unemploymen ballooned as he unemploy-men rae sayed high. A litle more han 44 percen o he unemployed have been ou o and looking or a job or more han six monhs. Te average lengho unemploymen soared o a record 40.4 weeks in July 2011.
5. Labor market pressures fall especially on communities of color, young work-ers, and those with little education.
Te Arican American unemploymenrae in July 2011 sayed well above average wih a high 15.9 percen and heHispanic unemploymen rae sayed high wih 11.3 percen, while he whieunemploymen rae was 8.1 percen. Youh unemploymen sood a a high 25.0percen. Te unemploymen rae or people wihou a high school diplomasayed high wih 15.0 percen compared o 9.3 percen or hose wih a highschool degree and 4.3 percen or hose wih a college degree.
Vulnerablegroups have sruggled disproporionaely amid he weak labor marke o hepas ew years compared o whie workers, older workers, and workers wihmore educaion.
igurE 1
Monthly job change since start of Great Recession
Jobs (in thousands)
3Cente o Amecan Poess | Economc Snapshot o Jly 2011
6. Household incomes drop amid prolonged labor market weaknesses.
Medianinaion-adjused household income ell 3.6 percen in 2008 and by anoher0.7 percen in 2009. I sood a $49,777 in 2009, is lowes level in inaion-adjused dollars since 1997. Whie amily income sood a $54,461, comparedo Arican American amily income, which was $32,584, or 59.8 percen o  whie income. Hispanic amily income was $38,039 in 2009, or 69.8 percen o  whie income.
7. Poverty continues to rise as incomes drop.
Te povery rae sood a 14.3 per-cen in 2009—is highes rae since 1994. Te Arican American povery rae was 25.8 percen, he Hispanic rae was 25.3 percen, and he whie rae was9.4 percen in 2009. Te povery rae or children under he age o 18 sood a20.7 percen. More han one-hird o Arican American children (35.7 percen)lived in povery in 2009 compared o 11.9 percen o whie children and 33.1percen o Hispanic children.
8. Employer-provided health insurance benefits continue to disappear.
Teshare o people wih employer-provided healh insurance dropped rom 64.2percen in 2000 o 55.8 percen in 2009. Tis is he lowes share since 1987 when he Census sared o rack hese daa.
Families’ income woes are husurher exacerbaed by less access o aordable healh insurance since ami-lies will have o save more han in he pas o prepare or evenual economicemergencies.
9. Family wealth losses linger.
oal amily  wealh was down $12.4 rillion (in 2011dollars) rom June 2007—is las peak—oMarch 2011 despie srong gains in hesock marke since early 2009. Home equiy says low, such ha homeowners on aver-age sill own only 38.0 percen o heirhomes, wih he res owed o banks.
Tisis he lowes share on record going back o1952. Households, already sruggling wihlow incomes in a weak labor marke, conse-quenly eel growing pressure o save moreand consume less. Te personal savingsrae increased rom 2.3 percen o afer-ax income in June 2007 o 5.1 percen in June2011.
Te dual challenge o low incomeand wealh hus holds back consumpiongrowh.
SEE igurE 2
igurE 2
Home equity as share of house values
30%40%50%60%70%80%90%1955 1960196519701975 1980198519901995200020052010
Percent of house value

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