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Economic Snapshot for December 2011

Economic Snapshot for December 2011

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Economic growth will require some additional policy support in the near term, writes Christian E. Weller.
Economic growth will require some additional policy support in the near term, writes Christian E. Weller.

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Published by: Center for American Progress on Dec 13, 2011
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1Center or American Progress | Economic Snapshot or December 2011
Economic Snapshot for December 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 ProgressDecember 2011
Te naion’s economic growh, albei posiive, is mosly oo low o subsanially reducehe unemploymen rae. Millions o unemployed Americans who have been ou o work and looking or a job or long periods o ime—5.7 million have been ou o work or aleas six monhs—are looking or policymakers o improve he economic oulook.I’s unlikely ha economic growh will quickly srenghen on is own, so i will requiresome addiional policy suppor in he near erm. A number o acors hold back economicgrowh, mainly he crushing deb burdens on American households.Policymakers hence have o ocus on wo separae shor-erm goals.Firs, hey need o srenghen he economy, which hey can do by increasing inra-srucure spending on schools, roads, bridges, and so orh, and by exending key middle-class ax cus, such as he emporary payroll ax cus, or an addiional year. And second, hey need o exend unemploymen-insurance benes or millions o unemployed Americans unil he economy and he labor marke improvesignicanly more.1.
Economic growth remains low.
 
Gross domesic produc, or GDP, grew a anannual rae o 2 percen in he hird quarer o 2011
1
. Business invesmenexpanded a a srong 14.8 percen in he hird quarer o 2011, while exporgrowh sayed slow wih 4.3 percen, consumpion grew only 2.3 percen, andgovernmen spending ell by 0.1 percen. Economic growh is relaively weak  because o low consumer demand due o high unemploymen and a crushing
 
2Center or American Progress | Economic Snapshot or December 2011
Figure 1
Share of long-term unemployment, business cycle averages
deb burden on consumers. Bu is also ha way because o slow demand orU.S. expors in he wake o European economic urmoil and because o hescal sruggles o ederal, sae, and local governmens.2.
The trade deicit stays high.
Te U.S. rade deci sood a 3.7 percen o GDPin he hird quarer o 2011, slighly below he 4 percen recorded in he secondquarer o 2011 bu sill subsanially up rom is las rough o 2.4 percen o GDP in he second quarer o 2009
2
. U.S. expor growh, even when i was srongin recen years, has no been enough o overcome even larger impor increases,ollowing in par higher oil prices and hus larger oil impors. Tis pus more pres-sure on oher pars o he economy—consumpion and business invesmen chie among hem—o generae aser economic growh and more jobs.3.
The labor market recovery is slow.
 Te privae secor coninuously added jobs rom February 2010 oNovember 2011 or a oal o 2.9million jobs.
3
Bu privae-secor jobgrowh slowed subsanially sar-ing in May 2011 hrough November2011. I averaged only 128,000 permonh during ha ime, down rom185,000 jobs per monh in he pre-ceding six monhs. Privae-secor jobgrowh is urher ose by job lossesin sae and local governmens, whereeachers, bus drivers, reghers, andpolice ocers, among ohers, are being le go, reecing governmens’ budge roubles. A oal o 430,000sae and local governmen jobs were los beween February 2010 and November 2011.
4
Privae-secor jobgrowh is oo weak o improve he economic orunes o America’s middleclass, making jobs policymakers’ op prioriy. (see Figure 1)4.
Unemployment stays high amid weak job growth.
 
Te unemploymen raesood a 8.6 percen in November 2011.
5
Long-erm unemploymen ballooned in recen years as he unemploymen rae sayed high. InNovember 2011, 43 percen o he unemployed had been ou o work and
Average weeks of unemploymentBusiness cycle start
6.8%9.0%13.8%10.4%9.0%12.3%14.8%15.9%18.7%34.3%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
Source: Bureau of Labor Statistics, CurrentPopulation Survey (Department of Labor, 2011).
 
3Center or American Progress | Economic Snapshot or December 2011
looking or a job or more han six monhs. Te average lengh o unem-ploymen reached a new record high o 40.9 weeks in November 2011. 2.2million unemployed Americans sand o lose heir benes by February 2012 i Congress does no exend unemploymen-insurance benes or helong-erm unemployed a he end o 2011.5.
Labor market pressures all especially on communities o color, young work-ers, and those with little education.
Te Arican American unemploymen raein November 2011 sayed well above average a 15.5 percen, and he Hispanicunemploymen rae sayed high a 11.4 percen, while he whie unemploy-men rae was 7.6 percen. Youh unemploymen sood a 23.7 percen. Andhe unemploymen rae or people wihou a high school diploma sayed higha 13.2 percen, compared o 8.8 percen or hose wih a high school diplomaand 4.4 percen or hose wih a college degree.
6
 Vulnerable groups sruggledisproporionaely more amid he weak labor marke o he pas ew years han whie workers, older workers, and workers wih more educaion. Bu even hosegroups ha are beter han heir counerpars in he weak labor marke suerremendously rom high and long-erm unemploymen.6.
Household incomes continue to plummet amid prolonged labor marketweaknesses.
Median inaion-adjused household income—hal o allhouseholds have more and he oher hal have less—sood a $49,445 in2010, is lowes level in inaion-adjused dollars since 1996. I ell again by 2.3 percen in 2010, an acceleraed decline afer median income dropped by 0.7 percen in 2009. American amilies saw ew gains during he recovery  beore he crisis hi in 2008 and experienced no income gains during hecurren economic recovery afer 2009.
7
7.
Income inequality on the rise.
 
Households a he 95h percenile—incomeso $180,810 in 2010—had incomes ha were more han nine imes—9.04imes, o be exac—he incomes o households a he 20h percenile, whomade $20,000. Tis is he larges gap beween he op 5 percen and he botom 20 percen o households since he U.S. Census Bureau saredkeeping record in 1967.
8
8.
Poverty continues to rise across a wide spectrum.
 
Te naion’s povery raerose o 15.1 percen in 2010—is highes rae since 1993. Te Arican Americanpovery rae was 27.4 percen, he Hispanic rae was 26.6 percen, and he whierae was 9.9 percen in 2010. Te povery rae or children under he age o 

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