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 naion’s economic growh, albei posiive, is mosly oo low o subsanially reducehe unemploymen rae. 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 aleas six monhs—are looking or policymakers o improve he economic oulook.I’s unlikely ha economic growh will quickly srenghen on is own, so i will requiresome addiional policy suppor in he near erm. A number o acors hold back economicgrowh, mainly he crushing deb burdens on American households.Policymakers hence have o ocus on wo separae shor-erm goals.Firs, hey need o srenghen he economy, which hey can do by increasing inra-srucure spending on schools, roads, bridges, and so orh, and by exending key middle-class ax cus, such as he emporary payroll ax cus, or an addiional year. And second, hey need o exend unemploymen-insurance benes or millions o unemployed Americans unil he economy and he labor marke improvesignicanly more.1.
Economic growth remains low.
Gross domesic produc, or GDP, grew a anannual rae o 2 percen in he hird quarer o 2011
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. Business invesmenexpanded a a srong 14.8 percen in he hird quarer o 2011, while exporgrowh sayed slow wih 4.3 percen, consumpion grew only 2.3 percen, andgovernmen spending ell by 0.1 percen. Economic growh is relaively 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. expors in he wake o European economic urmoil and because o hescal sruggles o ederal, sae, and local governmens.2.
The trade deicit stays high.
Te U.S. rade deci sood a 3.7 percen o GDPin he hird quarer o 2011, slighly below he 4 percen recorded in he secondquarer o 2011 bu sill subsanially up rom is las rough o 2.4 percen o GDP in he second quarer o 2009
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. U.S. expor growh, even when i was srongin recen years, has no been enough o overcome even larger impor increases,ollowing in par higher oil prices and hus larger oil impors. Tis pus more pres-sure on oher pars o he economy—consumpion and business invesmen chie among hem—o generae aser economic growh and more jobs.3.
The labor market recovery is slow.
Te privae secor coninuously added jobs rom February 2010 oNovember 2011 or a oal o 2.9million jobs.
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Bu privae-secor jobgrowh slowed subsanially sar-ing in May 2011 hrough November2011. I averaged only 128,000 permonh during ha ime, down rom185,000 jobs per monh in he pre-ceding six monhs. Privae-secor jobgrowh is urher ose by job lossesin sae and local governmens, whereeachers, bus drivers, reghers, andpolice ocers, among ohers, are being le go, reecing governmens’ budge roubles. A oal o 430,000sae and local governmen jobs were los beween February 2010 and November 2011.
4
Privae-secor jobgrowh is oo weak o improve he economic orunes o America’s middleclass, making jobs policymakers’ op prioriy. (see Figure 1)4.
Unemployment stays high amid weak job growth.
Te unemploymen raesood a 8.6 percen in November 2011.
5
Long-erm unemploymen ballooned in recen years as he unemploymen rae sayed 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 monhs. Te average lengh o unem-ploymen reached a new record high o 40.9 weeks in November 2011. 2.2million unemployed Americans sand o lose heir benes by February 2012 i Congress does no exend unemploymen-insurance benes 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 Arican American unemploymen raein November 2011 sayed well above average a 15.5 percen, and he Hispanicunemploymen rae sayed high a 11.4 percen, while he whie unemploy-men rae was 7.6 percen. Youh unemploymen sood a 23.7 percen. Andhe unemploymen rae or people wihou a high school diploma sayed higha 13.2 percen, compared o 8.8 percen or hose wih a high school diplomaand 4.4 percen or hose wih a college degree.
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Vulnerable groups sruggledisproporionaely more amid he weak labor marke o he pas ew years han whie workers, older workers, and workers wih more educaion. Bu even hosegroups ha are beter han heir counerpars in he weak labor marke suerremendously rom high and long-erm unemploymen.6.
Household incomes continue to plummet amid prolonged labor marketweaknesses.
Median inaion-adjused household income—hal o allhouseholds have more and he oher hal have less—sood a $49,445 in2010, is lowes level in inaion-adjused dollars since 1996. I ell again by 2.3 percen in 2010, an acceleraed decline afer median income dropped by 0.7 percen in 2009. American amilies saw ew gains during he recovery beore he crisis hi in 2008 and experienced no income gains during hecurren economic recovery afer 2009.
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7.
Income inequality on the rise.
Households a he 95h percenile—incomeso $180,810 in 2010—had incomes ha were more han nine imes—9.04imes, o be exac—he incomes o households a he 20h percenile, whomade $20,000. Tis is he larges gap beween he op 5 percen and he botom 20 percen o households since he U.S. Census Bureau saredkeeping record in 1967.
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8.
Poverty continues to rise across a wide spectrum.
Te naion’s povery raerose o 15.1 percen in 2010—is highes rae since 1993. Te Arican Americanpovery rae was 27.4 percen, he Hispanic rae was 26.6 percen, and he whierae was 9.9 percen in 2010. Te povery rae or children under he age o
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Economic Snapshot for December 2011
Economic growth will require some additional policy support in the near term, writes Christian E. Weller.
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