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Economic Snapshot for June 2012

Economic Snapshot for June 2012

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Policymakers need to create more economic certainty for American families, writes Christian E. Weller.
Policymakers need to create more economic certainty for American families, writes Christian E. Weller.

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Published by: Center for American Progress on Jun 26, 2012
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1Center or American Progress | Economic Snapshot or June 2012
Economic Snapshot for June 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 ProgressJune 2012
 American amilies coninue o ace large economic uncerainies as he economicrecovery slowly moves ino is ourh year. Te U.S. economy has orunaely avoidedslipping back ino recession aer he Grea Recession o 2007–2009. Bu he combina-ion o domesic issues such as large household deb burdens and scal challenges orlocal, sae, and ederal governmens ogeher wih inernaional challenges such as heEuropean sovereign deb crisis and wide swings in oil prices have creaed an environ-men in which he economy, he labor marke, and household incomes only improve very modesly, i a all.Te resul is ha amilies coninue o sruggle, even hough unemploymen andhousehold deb are decreasing and jobs and wealh are increasing. Unemploymenand deb remain unaccepably high and jobs and wealh remain unaccepably low. And improvemens in key areas, paricularly job creaion and he housing marke,remain remarkably slow. Policymakers have aced decisively in he pas wih payrollax cus and inrasrucure invesmens, or insance, o srenghen he economicrecovery. Te same should be rue now.Tese amilies need more solid economic ooing. 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, and people wihou a high school diploma. Also requiredare income suppors hrough, or insance, exended unemploymen insurance benes,higher minimum wages, and more 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.
2Center or American Progress | Economic Snapshot or June 2012
Economic growth remains positive but modest.
Gross domesic produc, or GDP,grew a an annual rae o 1.9 percen in he rs quarer o 2012. Governmenspending acually ell by 3.9 percen and business invesmen grew a a modes paceo 1.9 percen in he rs quarer o 2012, while consumpion grew by 2.7 percenand expors expanded a a srong 7.2 percen growh rae.
Cubacks in governmenspending reec he coninued scal crisis among ederal, sae, and local govern-mens and declining business invesmen. Te slow pace o business invesmen may indicae businesses’ uncerainy abou he economic oulook.
Competitiveness falls back.
Worker produciviy—he amoun o goods andservices produced in an hour o work in he nonarm business economy—is a key measure o he economy’s global compeiiveness. I decreased by 0.9 percen in hers quarer o 2012. Produciviy now sands 6.8 percen larger han in December2007, a he sar o he Grea Recession, bu well below he average increase o 9.3percen or similar periods in he pas.
The labor market recovery continues.
Teeconomy has coninuously added jobs sinceOcober 2010 and had 2.5 million more jobs inMay 2012 han in June 2009, when he eco-nomic recovery sared. Te privae secor added3.1 million jobs during his period. Te dier-ence beween he ne gain and privae-secorgain is explained by he loss o 605,000 sae andlocal governmen jobs, as budge cus reducedhe number o eachers, bus drivers, re ghers,and police ofcers, among ohers.
Job creaionis a op policy prioriy since privae-secor jobgrowh is sill oo weak o quickly overcomeoher job losses and o rapidly improve he eco-nomic orunes o America’s middle class.4.
Unemployment stays high.
Te unemploy-men rae sood a 8.2 percen in May 2012.Long-erm unemploymen has also balloonedin recen years as he unemploymen rae sayedelevaed. In May 2012, 42.8 percen o he unemployed were ou o work and look-ing or a job or more han six monhs. Te average lengh o unemploymen sayedhigh wih 39.7 weeks in May 2012.
Te long-erm unemployed are sill srugglingeven as privae-secor job creaion proceeds apace since millions o unemployed workers vie or he newly creaed jobs.
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
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 June 2012
Labor market pressures fall especially on communities of color, young workers, andthose with less education.
Te Arican American unemploymen rae in May 2012sayed well above average a 13.6 percen, he Hispanic unemploymen rae was 11percen, and he whie unemploymen rae was 7.4 percen. Youh unemploymensood a a high 24.6 percen. And he unemploymen rae or people wihou a highschool diploma sayed high wih 13 percen, compared o 8.1 percen or hose wiha high school degree, 7.9 percen or hose wih some college educaion, and 3.9 per-cen or hose wih a college degree.
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.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 aer 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 aer 2009.
Income inequality is 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.
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 2010compared o 35.0 percen o Hispanic children and 12.4 percen 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.9.
Employer-sponsored benefits disappear.
Te share o people wih employer-spon-sored healh insurance dropped rom 59.8 percen in 2007 o 55.3 percen in 2010.
 Te share o privae-secor workers who paricipaed in a reiremen plan a work ello 39.5 percen in 2010, down rom 42.0 percen in 2007.
Families have less eco-nomic securiy han in he pas due o ewer employmen-based benes, requiringmore privae savings o make up he dierence.

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