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 monh as amilies’ economic securiy is slowly improving:Te labor marke is adding jobs and household wealh is gradually rising. Bu subsanialchallenges remain including comparaively high unemploymen raes, especially among vulnerable populaion groups; high povery raes; a depressed housing marke; largehousehold deb burdens; and rising gasoline prices.Unorunaely no single policy can quickly bring solid gains o amilies’ economicsecuriy. I will ake comprehensive and argeed policy o secure America’s srugglingmiddle class.Susained and aser job creaion should be policymakers’ op concern, especially or vulnerable groups such as Arican Americans, young labor-orce paricipans, andpeople wihou a high school degree. Oher prioriies require income suppor hroughhings like exended unemploymen insurance benes, higher minimum wages, andmore opporuniies or employees o join a union.Policymakers also need o ocus on helping households build wealh aser hroughmeasures o srenghen 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 domesic produc, or GDP, grew a anannual rae o 3 percen in he ourh quarer o 2011, he sronges growh rae sincehe second quarer o 2010. Governmen spending acually ell by 4.2 percen in heourh quarer o 2011, consumpion grew by only 2.1 percen, and expors expandeda a slow 2.7 percen growh rae. Bu business invesmen grew a a reasonable 5.2percen.
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Weak economic growh would be sronger i no or low consumer demand,high unemploymen, and households’ crushing deb burden. Growh also remains weak because o slow demand or U.S. expors in he wake o European economicurmoil and because o scal sruggles a ederal, sae, and local levels.
2Center or American Progress | Economic Snapshot or April 2012
2.
Competitiveness grows at slow pace.
Worker produciviy, he amoun o goodsand services produced in an hour o work in he nonarm business economy, is akey measure o he economy’s global compeiiveness. I increased by 0.9 percenin he ourh quarer o 2011. Produciviy now sands 6.9 percen larger han inDecember 2007, a he sar o he Grea Recession, bu well below he averageincrease o 10.5 percen or similar periods in he pas.
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3.
The labor market recovery continues.
Te economy has coninuously added jobssince Ocober 2010 and had 2.3 million more jobs in March 2012 han in June 2009, when he economic recovery sared. Te privae secor added 2.9 million jobs duringhis period.
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Te dierence beween he ne gain and privae-secor gain is explained by he loss o 584,000 sae and local governmen jobs, as budge cus reduced henumber o eachers, bus drivers, re ghers, and police ocers, among ohers.
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Jobcreaion is a op policy prioriy since privae-secor job growh is sill oo weak o over-come oher job losses and improve he economic orunes o America’s middle class.4.
Suffering of the unemployed stays high.
Teunemploymen rae sood a 8.2 percen inMarch 2012. Long-erm unemploymen bal-looned in recen years as he unemploymen raesayed high. In March 2012, 42.5 percen o heunemployed were ou o work and looking or a job or more han six monhs. Te average lengho unemploymen sayed high wih 39.4 weeksin March 2012.
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Te long-erm unemployed aresill sruggling even as privae-secor job creaionacceleraes since millions o unemployed workersare sill vying or he newly creaed jobs.5.
Labor market pressures especially hurt commu-nities of color, young workers, and those withless education.
Te Arican American unemploy-men rae in March 2012 sayed well above averagea 14 percen, he Hispanic unemploymen rae was 10.3 percen, and he whie unemploymenrae was 7.3 percen. Youh unemploymen sooda a high 25 percen. And he unemploymen rae or people wihou a high schooldiploma sayed high wih 12.6 percen, compared o 8 percen or hose wih a highschool degree, 7.3 percen or hose wih some college educaion, and 4.2 percen orhose wih a college degree.
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Vulnerable groups have sruggled disproporionaely more amid he weak labor marke han whie workers, older workers, and workers wih more educaion. Bu even hose groups ha are beter han heir counerpars inhe weak labor marke suer 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 inaion-adjused household income—hal o all households have moreand he oher hal has less—sood a $49,445 in 2010, is lowes level in inaion-adjused dollars since 1996. I ell again by 2.3 percen in 2010, an acceleraeddecline afer median income dropped by 0.7 percen in 2009. American amiliessaw ew gains during he recovery beore he crisis hi in 2008 and experienced noincome gains during he curren economic recovery afer 2009.
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7.
Gasoline prices grow rapidly.
A gallon o regular gas cos $ 3.939 in he second week o April 2012. Tis represens an increase o 19.4 percen since he sar o he year.
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Rapidly rising gasoline prices pu pressure on oher consumpion, ypically on spending on cars in he shor erm.
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8.
Income inequality on the rise.
Households a he 95h percenile, wih 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 20h percenile, wih incomes o $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 kep record in 1967.
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9.
Poverty continues to rise across a wide spectrum.
Te povery rae rose o 15.1 per-cen in 2010—is highes rae since 1993. Te Arican American povery rae was27.4 percen, he Hispanic rae was 26.6 percen, and he whie rae was 9.9 percenin 2010. Te povery rae or children under he age o 18 sood a 22 percen. Morehan one-hird o Arican American children (39.1 percen) lived in povery in 2010compared o 35 percen o Hispanic children and 12.4 percen o whie children.
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Te prolonged economic slump, ollowing an excepionally weak labor marke beore he crisis, has aken a massive oll on he mos vulnerable.10.
Employer-sponsored benefits disappear.
Te share o people wih employer-sponsored healh insurance dropped rom 59.8 percen in 2007 o 55.3 percen in2010.
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Te share o privae-secor workers who paricipaed in a reiremen plana work ell o 39.5 percen in 2010, down rom 42 percen in 2007.
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Families haveless economic securiy han in he pas due o ewer employmen-based benes,requiring more privae savings o make up he dierence.11.
Family wealth losses linger.
oal amily wealh is down $14.4 rillion (in 2011dollars) rom June 2007—is las peak—o December 2012. Home equiy says low,such ha homeowners on average own only 38.4 percen o heir homes, wih heres owed o banks.
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Households, already sruggling wih low incomes in a weak labor marke, consequenly eel growing pressures o save more and consume less.Te dual burden o low income and decimaed household wealh pus he breaks onconsumer spending, holding back economic and job growh.
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Economic Snapshot for April 2012
The economic outlook is better for families, writes Christian E. Weller, but trouble spots remain, particularly on the jobs front.
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