economic snapshot: june 2013
TRANSCRIPT
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1 Center or American Progress | Economic Snapshot: May 2013
Economic Snapshot: June 2013
Christian E. Weller on the State of the EconomyChristian E. Weller, associate professor, Department of Public Policy and Public Affairs, University
of Massachusetts Boston, and Senior Fellow, Center for American Progress, and Sam Ungar
June 2013
Te economic recovery is nohing i no resilien. Te economy and he labor marke
in June coninued on heir pah oward a sel-susaining recovery, despie he onse o
adverse policy changes such as he end o a emporary payroll ax holiday in January2013 and across-he-board spending cus in April 2013. Economic growh and job
creaion would likely have been sronger under a dieren se o policies, bu housing-
marke growh provided he economy a much-needed boos.
Despie housing gains, Americas middle class desperaely needs sronger growh and
aser job creaion. Millions o amilies are sill suering rom high unemploymen, per-
sisen long-erm unemploymen, and massive household-deb burdens.
I is no oo lae or policymakers o reverse course away rom a sole ocus on deci
reducion and oward a combinaion o ax and spending changes ha will conribueo sronger economic growh and lower decis. Indeed, recen research by he Cener
or American Progress has shown ha he need or urgen deci reducion has signi-
canly abaed over he pas hree years.1 Wih his conex in mind, policymakers should
heed he recommendaions in CAPs comprehensive agenda or economic progress
o srenghen he American people and build he business environmen necessary or
susainable long-erm growh.2
1. Economic growth picked up at the beginning of 2013. Gross domesic produc, or
GDP, increased in he rs quarer o 2013 a an inaion-adjused annual rae o 2.4
percen. Domesic consumpion increased by an annual rae o 3.4 percen, hous-
ing spending grew by 12.1 percen, business invesmen acceleraed moderaely by
2.2 percen, and expors grew only by 0.8 percen in he rs quarer. Governmen
spending shrank again by 4.9 percen, slowing overall growh.3 Policy soluions
should hereore aim o ease he srain o scal auseriy on he economy and replace
across-he-board spending cus wih a scal policy approach ha can acually
enhance raher han slow economic growh.
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2. The moderate labor-market recovery continues in its fourth year. Tere were 5.1
million more jobs in May 2013 han in June 2009, when he economic recovery o-
cially sared. Te privae secor added 5.8 million jobs during his period. Te loss
o nearly 670,000 sae and local governmen jobs explains he dierence beween
he ne gain o all jobs and he privae-secor gain in his period. Budge cus reducedhe number o eachers, bus drivers, reghers, and police ocers, among ohers.4
Job creaion should be a op policy prioriy since privae-secor job growh is sill
oo weak o quickly overcome oher job losses and rapidly lower he unemploymen
rae. A reorienaion o ax and spending policies o srenghen economic growh
raher han a blind obsession wih deci
reducion a all coss could creae millions o
jobs ha Americas middle class desperaely
needs.
3. Long-term unemployment stays high, andsome communities continue to struggle
disproportionately from unemployment.
Te unemploymen rae sood a 7.6
percen in May 2013, and 37.3 percen o
he unemployed had been ou o work or
a leas six monhs. Tose ou o a job or a
long ime sruggle o regain employmen
because heir skills arophy. Tis is especially
rue or economically vulnerable groups.
Te Arican American unemploymen raewas 13.5 percen in May 2013, he Hispanic
unemploymen rae was 9.1 percen, and he
whie unemploymen rae was 6.7 percen.
Meanwhile, youh unemploymen sood a 24.5 percen. Te unemploymen rae
or people wihou a high school diploma icked down o 11.1 percen, compared
o 7.4 percen or hose wih a high school degree, 6.5 percen or hose wih some
college educaion, and 3.8 percen or hose wih a college degree.5 Tese popula-
ion groups wih higher unemploymen raes have sruggled disproporionaely
more amid he weak labor marke han whie workers, older workers, and workers
wih more educaion. Tis creaes a greaer need or progressive policy acions o
srenghen job creaion or everybody.
2 Center or American Progress | Economic Snapshot: May 2013
FIGURE 1
Share of long-term unemployment, business-cycle averages
Source: U.S. Bureau o Labor Statistics, Current Population Survey(U.S. Department o Labor, 2013).
0%
5%
10%
15%
20%
25%
30%
35%
40%
Dec 07Mar 01Aug 90Feb 80Dec 73Jan 70May 60Sep 57Aug 53Dec 48
Averagelong-termu
nemploymentrate
Business-cycle start date
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3 Center or American Progress | Economic Snapshot: May 2013
4. The rich continue to pull away from most Americans. Incomes o households in he
95h percenilehose wih incomes o $186,000 in 2011, he mos recen year or
which daa are availablewere more han nine imes he incomes o households in
he 20h percenile, whose incomes were $20,262. 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. Median inaion-adjused household income
sood a $50,054 in 2011, is lowes level in inaion-adjused dollars since 1995.And he povery rae remains high, a 15 percen in 2011, as he economic slump
coninues o ake a massive oll on he mos vulnerable ciizens.6
5. Employer-sponsored ben-
efits disappear. Te share
o people wih employer-
sponsored healh insurance
dropped rom 59.8 percen
in 2007 o 55.1 percen in
2011, he mos recen yearor which daa are available.7
Te share o privae-secor
workers who paricipaed
in a reiremen plan a work
ell o 39.2 percen in 2011,
down rom 42 percen in
2007.8 Families now have
less economic securiy han
in he pas due o ewer
employmen-based benes,which requires ha hey have
more privae savings o make
up he dierence.
6. Family wealth losses still linger. In March 2013 oal amily wealh was down $8.4
rillion (in 2013 dollars) rom March 2007, is previous peak. Homeowners on aver-
age own only 49.2 percen o heir homescompared o he long-erm average o 61
percen beore he Grea Recessionwih he res owed o banks.9 Homeowners
massive deb slows household-spending growh, as households sil l have litle colla-
eral or banks o loosen heir lending sandards and households spend less han hey
oherwise would on new homes and oher big-icke iems.
7. Household debt is still high. Household deb equaled 106.3 percen o afer-
ax income in March 2013, down rom a peak o 126 percen in March 2007.10
Household deb grew again relaive o afer-ax income in he rs quarer o 2013,
up rom a low o 104.8 percenhe rs such increase since he ourh quarer o
FIGURE 2
Postrecession productivity growth
Source: Calculations based on U.S. Bureau o Labor Statistics, Major Sector Productivity and Costs, Nonfarm Business Sector, Output per Hour (U.S.
Department o Labor, 2013).
-2%
0%
2%
4%
6%
8%
10%
10987654321 14131211 15 19181716 2120
Productivitygrowthfromr
eces
sionlevel
Months after end of recession
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4 Center or American Progress | Economic Snapshot: May 2013
2009. A reurn o deb growh oupacing income growh rom already-high deb
levels could evenually slow economic growh again i ineres raes rise rom hisori-
cally low levels and crowd ou household spending on oher iems.
8. The housing market continues to recover from historic lows. New home sales
amouned o an annual rae o 454,000 in April 2013a 29 percen increase rom
he 352,000 homes sold in April 2012 bu well below he hisorical average o698,000 homes sold beore he Grea Recession.11 Te median new-home price
in April 2013 was 14.9 percen higher han one year earlier.12 Exising-home sales
were up by 9.7 percen in April 2013 rom one year earlier, and he median price or
exising homes was up by 11 percen during he same period.13 Home sales have o
go a lo urher, given ha homeownership in he Unied Saes sood a 65 per-
cen in he rs quarer o 2013, down rom 68.2 percen beore he recession. Te
curren homeownership raes are similar o hose recorded in 1995, well beore he
mos recen housing bubble sared.14 Tough he housing-marke recovery sared
laer han he wider economic recoveryand sared ou a a record lowlaely he
housing marke has been growing rapidly and conribuing a much-needed booso economic progress. As such, here is sill pleny o room or he housing marke
o provide more simulaion o he economy more broadly. Te edgling housing
recovery could gain urher srengh i policymakers suppor economic growh and
job creaion a he same ime.
9. Homeowners distress remains high. Even hough morgage roubles have gradu-
ally eased since March 2010, nearly one in nine morgages is sill delinquen or
in oreclosure. In he rs quarer o 2013, he share o morgages ha were delin-
quen was 7.3 percen, and he share o morgages ha were in oreclosure was 3.6
percen.15
Many amilies delayed and deauled on morgage paymens amid highunemploymen and massive wealh losses. Tis caused some banks o be nervous
abou exending new morgages, which urher prolonged he economic slump.
Policymakers can accelerae economic growh by helping households lower heir
deb burdens hrough renancing help and deb orgiveness.
10. Corporate profits stay high near pre-crisis peaks. Inaion-adjused corporae pro-
is were 83.1 percen larger in March 2013 han in June 2009, when he economic
recovery sared. Te afer-ax corporae pro raepros o oal assessood
a 3 percen in March 2013, nearing he previous peak afer-ax pro rae o 3.2
percen ha occurred prior o he Grea Recession.16
11. Slow productivity growth marks the U.S. economy. Produciviy growh is he main
ingredien in rising living sandards. Wages, jobs, and pros depend on workers and
companies guring ou how o make more and beter hings in he same amoun o
ime. Oupu per hour, he main measure o produciviy growh, has expanded by
7.4 percen rom December 2007, when he Grea Recession sared, o March 2013,
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5 Center or American Progress | Economic Snapshot: May 2013
he las quarer or which daa are available. Tis is
subsanially less han he average produciviy growh
o 9.6 percen during he same periods in previous
business cycles o equal or greaer lengh.17
12. The outlook for budget deficits improves. Te
nonparisan Congressional Budge Oce, or CBO,esimaed in May 2013 ha he ederal governmen
will have a decihe dierence beween axes and
spendingo 4 percen o GDP or scal year 2013,
which runs rom Ocober 1, 2012, o Sepember 30,
2013. Tis deci projecion is down rom 7 percen in
FY 2012.18 Tis projeced deci or FY 2013 is beter
han wha CBO prediced in February 2013, when i
esimaed a deci o 5.3 percen o GDP or FY 2013.
Tis improvemen ollows larger-han-expeced ax
collecions, an improving economy, and slower healhcare inaion, among oher acors.19 Te esimaed
deci or FY 2013 is much smaller han i was in
previous years due o a number o measures ha poli-
cymakers have already aken o slow spending growh
and raise a litle more revenue han was expeced
jus las year. Te improving scal oulook generaes
breahing room or policymakers o ocus heir aten-
ion on long-erm growh and job creaion in addiion
o long-erm deci reducion.
Chrisian E. Weller is a Senior Fellow a he Cener or American Progress and a proessor in
he Deparmen o Public Policy and Public Afairs a he McCormack Graduae School o
Policy and Global Sudies a he Universiy o Massachusets Boson. Sam Ungar is a Special
Assisan a he Cener.
FIGURE 3
Congressional Budget Office deficit projections as
a percent of GDP for FY 2013
Sources: Congressional Budget Ofce, The Budget and Economic Outlook: Fiscal Years 2013 to
2023 (2013); Congressional Budget Ofce, Updated Budget Projections: Fiscal Years 2013 to 2023
(2013).
0%
1%
2%
3%
4%
5%
6%
May 2013February 2013
Date of CBO projection
PercentofGDP
5.3% of GDP
=
$845 billion
4% of GDP
=
$642 billion
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6 Center or American Progress | Economic Snapshot: May 2013
Endnotes
1 Michael Linden, Its Time to Hit the Reset Button on theFiscal Debate (Washington: Center or American Progress,2013), available at http://ww w.americanprogress.org/is-sues/budget/report/2013/06/06/65497/its-time-to-hit-the-reset-button-on-the-scal-debate/.
2 Jennier Erickson and Michael Ettlinger, 300 Million Engines
o Growth (Washington: Center or American Progress,2013), available at http://ww w.americanprogress.org/issues/economy/report/2013/06/13/66204/300-million-engines-o-growth/.
3 U.S. Bureau o Economic Analysis, National Income andProduct Accounts (U.S. Department o Commerce, 2013).
4 Employment-growth data are calculated based on U.S.Bureau o Labor Statistics, Current Employment Statistics(U.S. Department o Labor, 2013). The Current EmploymentStatistics are also known as the p ayroll survey.
5 Unemployment numbers are taken rom U.S. Bureau oLabor Statistics, Current Population Survey (U.S. Depart-ment o Labor, 2013). The Current Population Survey is alsoknown as the household survey.
6 Bureau o the Census, Income, Poverty, and Health Insur-ance Coverage in the United States: 2011 (U.S. Department
o Commerce, 2012). This report is occasionally reerred toas the poverty report.
7 Ibid.
8 Craig Copeland, Employment-Based Retirement PlanParticipation: Geographic Dierences and Trends, 2011(Washington: Employee Benet Research I nstitute, 2012);Craig Copeland, Employment-Based Retirement PlanParticipation: Geographic Dierences and Trends, 2007(Washington: Employee Benet Research I nstitute, 2008).
9 Wealth calculations are based on Board o Governors othe Federal Reserve System, Release Z.1 Flow o FundsAccounts o the United States (2013). Real wealth is thenominal wealth deated by the price index or the PersonalConsumption Expenditure Index. The Personal Consump-tion Expenditure Index is rom U.S. Bureau o EconomicAnalysis, National Income and Product Accounts.
10 Debt calculations are based on Board o Governors, FederalReserve System, Release Z.1 Flow o Funds Accounts o theUnited States. Debt levels are the ratio o the nominal debtlevels divided by the nominal disposable personal income.Debt reers to total credit instruments.
11 The historical average reers to the average annualized
monthly residential sales rom January 1963, when the Cen-sus data start, to Decemb er 2007, when the Great Recessionstarted. Calculations are based on Bureau o the Census,New Residential Sales Historical Data (U.S. Department oCommerce, 2013).
12 Ibid.
13 National Association o Realtors, Existing-Home Sales andPrices Continue to Rise in February (2013).
14 Bureau o the Census, Housing Vacancies and Homeowner-ship (U.S. Department o Commerce, 2013).
15 Data are taken rom Mortgage Bankers Association, Na-tional Delinquency Survey (2013).
16 Prot rates are calculated based on data rom Board oGovernors, Federal Reserve System, Release Z.1 Flow oFunds Accounts o the United States. Ination adjustments
are based on the Personal Consumption Expenditure Indexrom U.S. Bureau o Economic Analysis, National I ncome andProduct Accounts.
17 Calculations are based on U.S. Bureau o Labor Statistics,Major Sector Productivity and Costs, Nonarm Business Sec-tor, Output per Hour (U.S. Department o Labor, 2013).
18 Congressional Budget Ofce, Updated Budget Projections:Fiscal Years 2013 to 2023 (2013).
19 Congressional Budget Ofce, The Budget and EconomicOutlook: Fiscal Years 2012 to 2023 (2013).