1Center or American Progress | Economic Snapshot or May 2012
Economic Snapshot for May 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 ProgressMay 2012
Families’ economic securiy is slowly improving: Te labor marke is adding jobs andhousehold wealh is gradually increasing. Bu amilies coninue o sruggle given he depho he pas recession and he slow pace o improvemens during he economic recovery.Policymakers aced decisively in he pas wih exended unemploymen insurance ben-es, payroll ax cus, and inrasrucure invesmens when hey el a sense o urgency abou helping America’s middle class. Bu hey should sill eel ha sense o urgency since comparaively high unemploymen raes—especially among vulnerable popula-ion groups—high povery raes, a depressed housing marke, and large household deb burdens have pu America’s middle class in an unaccepably insecure posiion.Making hem more secure will ake comprehensive and argeed policy. Susainedand aser job creaion should be policymakers’ op concern, especially or vulnerablegroups such as Arican Americans, young labor orce paricipans, and people wihou ahigh school degree. Also required are income suppors hrough, or insance, exendedunemploymen insurance benes, higher minimum wages, and more opporuniies oremployees 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 positive but modest.
Gross domesic produc, or GDP,grew a an annual rae o 2.2 percen in he rs quarer o 2012. Governmen spendingacually ell by 3 percen, and business invesmen declined by 2.1 percen in he rsquarer o 2012, while consumpion grew by 2.9 percen, and expors expanded a areasonable 5.4 percen growh rae.
1
Cubacks in governmen spending reec he con-inued scal crisis among ederal, sae, and local governmens and declining business
2Center or American Progress | Economic Snapshot or May 2012
invesmen. Te drop-o in business invesmen may be only emporary, however, sincei reecs in large measure a slowdown o he very rapid expansion in he mining secor.
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2.
Competitiveness falls back.
Worker produciviy—he amoun o goods and ser- vices produced in an hour o work in he nonarm business economy—is a key mea-sure o he economy’s global compeiiveness. I decreased by 0.5 percen in he rsquarer o 2012. Produciviy now sands 6.9 percen larger han i was in December2007, a he sar o he Grea Recession, bu is well below he average increase o 9.3percen 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 2.5 million more jobs in April 2012 han i did in June2009, when he economic recovery sared. Te privae secor added 3.1 million jobsduring his period. Te dierence beween he ne employmen gain and privae-secor gain is explained by he loss o 607,000 sae and local governmen jobs, as budge cus reduced he number o eachers, busdrivers, re ghers, and police ocers, amongohers.
4
Job creaion is a op policy prioriy sinceprivae-secor job growh is sill oo weak oquickly overcome oher job losses and o rapidly improve he economic orunes o America’smiddle class.4.
Unemployment stays high.
Te unemploymenrae sood a 8.1 percen in April 2012. Long-ermunemploymen is also sill a problem: I balloonedin recen years as he unemploymen rae sayedelevaed. In April 2012, 41.3 percen o he unem-ployed were ou o work and had been looking ora job or more han six monhs. Te average lengho unemploymen sayed high, wih 39.1 weeks in April 2012.
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Te long-erm unemployed are sillsruggling even as privae-secor job creaion pro-ceeds apace since millions o unemployed workers vie or he newly creaed jobs.5.
Labor market pressures fall especially on communities of color, young workers,and those with less education.
Te Arican American unemploymen rae in April2012 sayed well above average a 13 percen, he Hispanic unemploymen rae was 10.3 percen, and he whie unemploymen rae was 7.4 percen. Youh unem-ploymen sood a a high 24.9 percen. And he unemploymen rae or people wihou a high school diploma sayed high wih 12.5 percen, compared o 7.9percen or hose wih a high school diploma, 7.6 percen or hose wih some col-
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%35.1%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 May 2012
lege educaion, and 4 percen or hose wih a college degree.
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Vulnerable groupshave sruggled disproporionaely more amid he weak labor marke han do whie workers, older workers, and workers wih more educaion. Bu even hose groupsha are beter han heir counerpars in he weak labor marke suer remen-dously rom high unemploymen.6.
Household incomes continue to drop amid prolonged labor market weaknesses.
Median inaion-adjused household income—where hal o all households hasmore and he oher hal has less—sood a $49,445 in 2010, is lowes level ininaion-adjused dollars since 1996. I ell again by 2.3 percen in 2010, an acceler-aed decline 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.
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 sared keeping record in 1967.
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8.
Poverty continues to rise across a wide spectrum.
Te povery rae rose o 15.1percen 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 2010,compared 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.9.
Employer-sponsored benefits disappear.
Te share o people wih employer-spon-sored healh insurance dropped rom 59.8 percen in 2007 o 55.3 percen in 2010.
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Te share o privae-secor workers who paricipaed in a reiremen plan a work ello 39.5 percen in 2010, down rom 42 percen in 2007.
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Families have less eco-nomic securiy han in he pas due o ewer employmen-based benes, requiringmore privae savings o make up he dierence.10.
Family wealth losses linger.
oal amily wealh is down $14.4 rillion (in 2011dollars) rom June 2007—is las peak—o December 2011. 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 brakes onconsumer spending, holding back economic and job growh.
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Economic Snapshot for May 2012
Policymakers should feel a sense of urgency about helping America’s middle class, writes Christian Weller.
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