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Economic Snapshot for March 2012

Economic Snapshot for March 2012

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Smart economic policy can continue to strengthen the economic recovery and help accelerate private-sector job creation, writes Christian E. Weller.
Smart economic policy can continue to strengthen the economic recovery and help accelerate private-sector job creation, writes Christian E. Weller.

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Published by: Center for American Progress on Mar 29, 2012
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1Center or American Progress | Economic Snapshot rom March 2012
Economic Snapshot for March 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 ProgressMarch 29, 2012
Te naion’s economy and labor marke are gradually gaining srengh. Job creaion is upand he unemploymen rae keeps alling. Bu American amilies need more monhs o much-sronger job creaion o eliminae he massive economic pain ha he crisis andis aermah brough.Subsanial rouble spos remain in he economy and in households’ economic securiy.Economic growh is robus bu no sellar, he housing marke remains sluggish, andgovernmen nances coninue o sruggle. Unemploymen is sill high, incomes are low,povery is high, and household wealh remains low.Growh and job creaion are coming rom he privae secor bu he curren economicrecovery would have been weaker and would have happened laer had policymakers noaken seps in he pas ew years o inves in inrasrucure and help he mos vulnerable.Smar economic policy can coninue o srenghen he recovery and help acceleraeprivae-secor job creaion, especially i i ocuses on he mos vulnerable populaiongroups—paricularly communiies o color, he long-erm unemployed, and youngerand lower-incomesemployees.1.
Economic growth remains robust.
Gross domesic produc, or GDP, grew a anannual rae o 3 percen in he ourh quarer o 2011. No single secor sands ouas driving economic growh o higher errain. Consumpion grew only 2.1 percenand business invesmen grew 2.8 percen in ha quarer, while expor growhsayed relaively slow wih 4.3 percen and governmen spending acually ell by 4.4percen.
1
Economic growh remains weak because o low consumer demand—dueo high unemploymen and households’ crushing deb burden—bu also becauseo slow demand or U.S. expors in he wake o European economic urmoil and because o scal sruggles o ederal, sae, and local governmens.
 
2Center or American Progress | Economic Snapshot rom March 2012
2.
Competitiveness grows at slow pace.
 Worker produciviy—he amoun o goodsand services produced in an hour o work in he nonarm business economy—isa key measure o he economy’s global compeiiveness. I increased by 0.9 per-cen in he ourh quarer o 2011, deceleraing rom 1.8 percen growh in heprevious quarer. Produciviy now sands 6.6 percen larger han in December2007, a he sar o he Grea Recession, bu well below he average increase o 7.9 percen or similar periods in he pas.
2
 3.
The labor market recovery continues.
Te economy has added jobs coninuously since Ocober 2010 and had 2.2 million more jobs in February 2012 han in June2009, when he economic recovery sared. he privae secor has added 2.8 million jobs during his period.
3
Te dierence beween he ne gain and privae-secorgain is explained by he loss o 590,000 sae and local governmen jobs, as budgecus reduced he number o eachers, bus drivers, reghers, and police ocers,among ohers.
4
Job creaion is a op policy prioriy since privae-secor job growhis sill oo weak o overcome oher job losses and o improve he economic oruneso America’s middle class.4.
Suffering of the unemployed stays high.
 
Teunemploymen rae sood a 8.3 percen inFebruary 2012. long-erm unemploymen has ballooned in recen years as he unemploymenrae sayed high. In February 2012, 42.6 perceno he unemployed were ou o work and look-ing or a job or more han six monhs. Teaverage lengh o unemploymen sayed higha 40 weeks in February 2012.
5
Te long-ermunemployed are sill sruggling, even as privae-secor job creaion acceleraes, since here aresill millions o unemployed workers vying orhe newly creaed jobs. (see Figure 1)5.
Labor market pressures fall especially oncommunities of color, young workers, andthose with less education.
Te Arican American unemploymen rae in February 2012 sayed well above average a 14.1percen, and he Hispanic unemploymen rae sayed high a 10.7 percen, whilehe whie unemploymen rae was 7.3 percen. Youh unemploymen sood a ahigh 23.8 percen. And he unemploymen rae or people wihou a high schooldiploma sayed high a 12.9 percen, compared o 8.3 percen or hose wih a highschool diploma and 4.2 percen or hose wih a college degree.
6
Vulnerable groupshave sruggled disproporionaely more amid he weak labor marke han whie
Figure 1
Share of long-term unemployment, business cycle averages
Average weeks of unemploymentBusiness cycle start
6.8%9.0%13.8%10.4%9.0%12.3%14.8%15.9%18.7%34.8%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, Current Population Survey (Department of Labor, 2011).
 
3Center or American Progress | Economic Snapshot rom March 2012
 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 remen-dously rom high and long-erm unemploymen.6.
Household incomes continue to drop amid prolonged labor market weaknesses.
Median infa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 infaion-adjused dollars since 1996. I ell by 2.3 percen in 2010, an acceleraed declineaer 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 have experienced noincome gains during he curren economic recovery aer 2009.
7
7.
Income inequality on the rise.
 
Households a he 95h percenile, wih incomes o $180,810 in 2010, had incomes ha were more han nine imes—9.04 imes, o beexac—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 percen o households since he U.S. Census Bureau sared keeping record in 1967.
8
 8.
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 was27.4 percen, he Hispanic rae was 26.6 percen, and he whie rae was 9.9 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 12.4 percen o whie children.
9
Teprolonged economic slump, ollowing an excepionally weak labor marke beore hecrisis, has aken a massive oll on he mos vulnerable populaions.9.
Employer-provided benefits continue to disappear.
Te share o people wihemployer-provided healh insurance dropped rom 59.8 percen in 2007 o 55.3 per-cen in 2010.
10
And he share o privae-secor workers who paricipaed in a reire-men plan a work ell rom 42 percen in 2007 o 39.5 percen in 2010.
11
Familieshus have less economic securiy han in he pas due o less access o key employ-men-based benes, requiring more privae savings o make up he dierence.10.
Family wealth losses linger.
oal amily wealh is down $14.4 rillion (in 2011dollars) rom June 2007—is las peak—o December 2012. Home equiy sayslow, such ha homeowners on average sill own only 38.4 percen o heir homes, wih he res owed o banks.
12
Households, already sruggling wih low incomes in a weak labor marke, consequenly eel growing pressures o save more and consumeless. Te dual burden o low income and decimaed household wealh pus he brakes on consumer spending, holding back economic and job growh.

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