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Economic Snapshot for January 2012

Economic Snapshot for January 2012

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Smart economic policy can continue to strengthen the economic recovery, writes Christian E. Weller.
Smart economic policy can continue to strengthen the economic recovery, writes Christian E. Weller.

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Published by: Center for American Progress on Jan 30, 2012
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1Center or American Progress | Economic Snapshot or January 2012
Economic Snapshot for January 2012
Christian 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 ProgressJanuary 2012
Te economy is gradually gaining srengh, creaing more jobs and reducing he unem-ploymen rae. Economic pain or American amilies, hough, remains signican wihrelaively high unemploymen, persisen long-erm unemploymen, lingering house-hold wealh losses, and crushing deb burdens. Te economy will have o grow muchaser or much longer o resore economic securiy or America’s middle class.Te privae secor drives growh and job creaion, bu he curren economic recovery  would be weaker and delayed had policymakers no aken seps in he pas ew years oinves in inrasrucure and help he mos vulnerable.Smar economic policy can coninue o srenghen he economic recovery and helpaccelerae privae-secor job creaion. Te righ seps can srenghen he economy,such as by increasing inrasrucure spending on schools, roads, bridges, and more, and by exending key middle-class ax cus, such as he emporary payroll ax cus or anaddiional year. And policymakers can lend a helping hand o millions o unemployed workers who canno nd a job and need exended unemploymen insurance benesunil he economy and he labor marke improve signicanly urher.1.
Economic growth remains low.
Gross domesic produc, or GDP, grew a an annualrae o 2.8 percen in he ourh quarer o 2011. Business invesmen droppedsharply by 14 percenage poins rom he hird quarer 2011 o 1.7 percen,
whileexpor growh remained unchanged a 4.7 percen. Consumpion grew a 2.0percen, and governmen spending ell by 4.6 percen, he second larges dropsince he sar o he recession. Economic growh is relaively weak because o low consumer demand, due o high unemploymen and households’ crushing deb burden, bu also because o slow demand or U.S. expors in he wake o Europeaneconomic urmoil and he scal sruggles o ederal, sae, and local governmens.
2Center or American Progress | Economic Snapshot or January 2012
Average weeks of unemploymentBusiness cycle start
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, Current PopulationSurvey (Department of Labor, 2011).
Figure 1
Share of long-term unemployment, business cycle averages
The trade deficit stays high.
Te U.S. rade deci sood a 3.8 percen o GDPin he ourh quarer o 2011, slighly above he 3.7 percen recorded in hehird quarer o 2011, and sill subsanially up rom is las rough o 2.4 perceno GDP in he second quarer o 2009.
U.S. expor growh, even when i wassrong in recen years, has no been enough o overcome even larger imporincreases, ollowing in par higher oil prices and hus larger oil impors. Tecrisis in Europe could slow U.S. expor growh, while urmoil in he Middle Eashas kep oil prices high—wo rends ha could resul in expanding U.S. radedecis in he near uure.3.
The labor market recovery is slow.
Te economy has added jobs coninuously since Ocober 2010. Tere were more han 100,000 jobs each monh or six monhs in a row, rom July o December 2011, marking he rs such six-monhperiod since lae 2005 o early 2006. And he privae secor coninuously added jobs rom March 2010 o December 2011 or a oal o 3.2 million jobs.
Bu saeand local governmens are cuting jobs or eachers, bus drivers, reghers, andpolice ocers, among ohers, reecing governmens’ budge roubles. A oalo 447,000 sae and local governmen jobs were los beween March 2010 andDecember 2011.
Te botom line is ha job creaion is a op policy prioriy sinceprivae-secor job growh is sill oo weak o overcome oher job losses and oimprove he economic orunes o America’s middle class.4.
Unemployment stays high amid weak jobgrowth.
Te unemploymen rae sood a 8.5percen in December 2011. And long-ermunemploymen has ballooned in recen yearsas he unemploymen rae sayed high. InDecember 2011, 42.7 percen o he unem-ployed have been ou o and looking or a jobor more han six monhs. Te average lengho unemploymen sayed near new recordhighs wih 40.8 weeks in December 2011.
 Te long-erm unemployed are srugglingdue o a weak economy, making exendedunemploymen benes necessary unil heeconomy and he labor marke subsanially improve. (see Figure 1)5.
Labor market pressures fall especially oncommunities of color, young workers, and those with less education.
Te Arican American unemploymen rae in December 2011 sayed well above average wiha high 15.8 percen, and he Hispanic unemploymen rae sayed high wih 11percen, while he whie unemploymen rae was 7.5 percen. Youh unemploy-
3Center or American Progress | Economic Snapshot or January 2012
men sood a a high 23.1 percen. Meanwhile, he unemploymen rae or peo-ple wihou a high school diploma sayed high wih 13.8 percen, compared o8.7 percen or hose wih a high school degree and 4.1 percen or hose wih acollege degree.
Vulnerable groups have sruggled dispropor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 hose groups ha are beter hanheir counerpars in he weak labor marke suer remendously rom high andlong-erm unemploymen.6.
Household incomes continue to drop amid prolonged labor market weaknesses.
 Median inaion-adjused household income—hal o all households have moreand he oher hal has less—sood a $49,445 in 2010, is lowes level in inaion-adjused dollars since 1996. I ell by 2.3 percen in 2010, an acceleraed declineafer 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 incomegains during he curren economic recovery afer 2009.
Income inequality on the rise.
Households a he 95h percenile, wih 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, wih incomes o $20,000. 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 kep record in 1967.
Poverty continues to rise across a wide spectrum.
Te povery rae rose o 15.1percen in 2010—is highes rae since 1993. Te Arican American povery rae was 27.4 percen, he Hispanic rae was 26.6 percen, and he whie rae was9.9 percen in 2010. Te povery rae or children under he age o 18 sood a22 percen. More han one-hird o Arican American children (39.1 percen)lived in povery in 2010, compared o 35 percen o Hispanic children and 12.4percen o whie children.
Te prolonged economic slump, ollowing an excep-ionally weak labor marke beore he crisis, has aken a massive oll on he mos vulnerable populaions.9.
Employer-provided health insurance benefits continue to disappear.
Te share o people wih employer-provided healh insurance dropped rom 65.1 percen in2000 o 55.3 percen in 2010. Tis is he lowes share since 1987 when he Censussared o rack hese daa.
Families hus ace urher income woes because o lessaccess o aordable healh insurance. Tey will have o save more han in he paso prepare or evenual economic emergencies.10.
Family wealth losses linger.
oal amily wealh is down $15.1 rillion (in 2011dollars) rom June 2007—is las peak—o Sepember 2011. Home equiy sayslow, such ha homeowners on average sill own only 38.7 percen o heir homes,

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