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Economic Snapshot for April 2012

Economic Snapshot for April 2012

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The economic outlook is better for families, writes Christian E. Weller, but trouble spots remain, particularly on the jobs front.
The economic outlook is better for families, writes Christian E. Weller, but trouble spots remain, particularly on the jobs front.

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Published by: Center for American Progress on Apr 25, 2012
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1Center or American Progress | Economic Snapshot or April 2012
Economic Snapshot for April 2012
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 ProgressApril 2012
Tere’s some good news his monh as amilies’ economic securiy is slowly improving:Te labor marke is adding jobs and household wealh is gradually rising. Bu subsanialchallenges remain including comparaively high unemploymen raes, especially among vulnerable populaion groups; high povery raes; a depressed housing marke; largehousehold deb burdens; and rising gasoline prices.Unorunaely no single policy can quickly bring solid gains o amilies’ economicsecuriy. I will ake comprehensive and argeed policy o secure America’s srugglingmiddle class.Susained and aser job creaion should be policymakers’ op concern, especially or vulnerable groups such as Arican Americans, young labor-orce paricipans, andpeople wihou a high school degree. Oher prioriies require income suppor hroughhings like exended unemploymen insurance benes, higher minimum wages, andmore opporuniies or employees o join a union.Policymakers also need o ocus on helping households build wealh aser hroughmeasures o srenghen he housing marke, help households save more money, andallow amilies o lower heir deb burden even more han in he pas.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, he sronges growh rae sincehe second quarer o 2010. Governmen spending acually ell by 4.2 percen in heourh quarer o 2011, consumpion grew by only 2.1 percen, and expors expandeda a slow 2.7 percen growh rae. Bu business invesmen grew a a reasonable 5.2percen.
1
Weak economic growh would be sronger i no or low consumer demand,high unemploymen, and households’ crushing deb burden. Growh also remains weak because o slow demand or U.S. expors in he wake o European economicurmoil and because o scal sruggles a ederal, sae, and local levels.
 
2Center or American Progress | Economic Snapshot or April 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, is akey measure o he economy’s global compeiiveness. I increased by 0.9 percenin he ourh quarer o 2011. Produciviy now sands 6.9 percen larger han inDecember 2007, a he sar o he Grea Recession, bu well below he averageincrease o 10.5 percen or similar periods in he pas.
2
 3.
The labor market recovery continues.
Te economy has coninuously added jobssince Ocober 2010 and had 2.3 million more jobs in March 2012 han in June 2009, when he economic recovery sared. Te privae secor added 2.9 million jobs duringhis period.
3
Te dierence beween he ne gain and privae-secor gain is explained by he loss o 584,000 sae and local governmen jobs, as budge cus reduced henumber o eachers, bus drivers, re ghers, and police ocers, among ohers.
4
Jobcreaion is a op policy prioriy since privae-secor job growh is sill oo weak o over-come oher job losses and improve he economic orunes o America’s middle class.4.
Suffering of the unemployed stays high.
 
Teunemploymen rae sood a 8.2 percen inMarch 2012. Long-erm unemploymen bal-looned in recen years as he unemploymen raesayed high. In March 2012, 42.5 percen o heunemployed were ou o work and looking or a job or more han six monhs. Te average lengho unemploymen sayed high wih 39.4 weeksin March 2012.
5
Te long-erm unemployed aresill sruggling even as privae-secor job creaionacceleraes since millions o unemployed workersare sill vying or he newly creaed jobs.5.
Labor market pressures especially hurt commu-nities of color, young workers, and those withless education.
 
Te Arican American unemploy-men rae in March 2012 sayed well above averagea 14 percen, he Hispanic unemploymen rae was 10.3 percen, and he whie unemploymenrae was 7.3 percen. Youh unemploymen sooda a high 25 percen. And he unemploymen rae or people wihou a high schooldiploma sayed high wih 12.6 percen, compared o 8 percen or hose wih a highschool degree, 7.3 percen or hose wih some college educaion, and 4.2 percen orhose wih a college degree.
6
Vulnerable groups have sruggled disproporionaely more amid he weak labor marke 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 unemploymen.
Figure 1
Share of long-term unemployment, business cycle averages
Source: Bureau of Labor Statistics, Current Population Survey (Department of Labor, 2011).
Average weeks of unemploymentBusiness cycle start
6.8%9.0%13.8%10.4%9.0%12.3%14.8%15.9%18.7%34.9%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
 
3Center or American Progress | Economic Snapshot or April 2012
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 again by 2.3 percen in 2010, an acceleraeddecline afer median income dropped by 0.7 percen in 2009. American amiliessaw ew gains during he recovery beore he crisis hi in 2008 and experienced noincome gains during he curren economic recovery afer 2009.
7
7.
Gasoline prices grow rapidly.
A gallon o regular gas cos $ 3.939 in he second week o April 2012. Tis represens an increase o 19.4 percen since he sar o he year.
8
Rapidly rising gasoline prices pu pressure on oher consumpion, ypically on spending on cars in he shor erm.
9
 8.
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 kep record in 1967.
10
 9.
Poverty continues to rise across a wide spectrum.
 
Te povery rae rose o 15.1 per-cen 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 2010compared o 35 percen o Hispanic children and 12.4 percen o whie children.
11
 Te prolonged economic slump, ollowing an excepionally weak labor marke beore he crisis, has aken a massive oll on he mos vulnerable.10.
Employer-sponsored benefits disappear.
Te share o people wih employer-sponsored healh insurance dropped rom 59.8 percen in 2007 o 55.3 percen in2010.
12
Te share o privae-secor workers who paricipaed in a reiremen plana work ell o 39.5 percen in 2010, down rom 42 percen in 2007.
13
Families haveless economic securiy han in he pas due o ewer employmen-based benes,requiring more privae savings o make up he dierence.11.
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ays low,such ha homeowners on average own only 38.4 percen o heir homes, wih heres owed o banks.
14
Households, already sruggling wih low incomes in a weak labor marke, consequenly eel growing pressures o save more and consume less.Te dual burden o low income and decimaed household wealh pus he breaks onconsumer spending, holding back economic and job growh.

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