economic snapshot: june 2014
TRANSCRIPT
-
8/12/2019 Economic Snapshot: June 2014
1/7
1 Center for American Progress | Economic Snapshot: June 2014
Economic Snapshot: June 2014
Christian E. Weller on the State of the Economy
By Christian E. Weller and Jackie Odum June 25, 2014
I has been exacly five years his June since he Grea Recession ended and he eco-
nomic recovery officially began. Bu calling he slow pace o economic growh and
anemic job creaion a recoverywhile echnically correcseems callous in he ace o
he many financial hardships millions o middle-class Americans sill ace. Many suffer
rom he economic and menal allou o unemploymen, ofen or long periods o ime.Povery is consequenly widespread and incomes are basically fla, while employers are
cuting back on healh insurance and pension benefis, which will leave households even
more financially vulnerable in he uure. Bu he pas five years have been lucraive or
he lucky ew a he op, as profis and he sock marke have gone gangbusers, raising
income inequaliy o new heighs.
Unsurprisingly, poliicians are no popping he champagne corks o celebrae he five-
year anniversary o he end o he Grea Recession. Many o hem, paricularly ruculen
conservaives ben on opposing Presiden Barack Obamas policies a all coss, know
ha hey prioriized scoring cheap poliical poins over helping American amilies. Teiniial simulus, he American Recovery and Reinvesmen Ac o 2009, did exacly wha
i was mean o do: I kep he economy rom sliding ino anoher Grea Depression,
bringing back economic growh and sopping he unemploymen rae rom rising. Bu
conservaives ried o brand i as a ailure and, raher han building on his early suc-
cess, ocused on undoing i hrough a series o cus o criical public programssuch
as he Supplemenal Nuriion Assisance Program, or SNAP, ormerly known as ood
sampsha direcly hur amilies and economic growh. Deea o heir poliical
opponens became he rallying cry or hese poliicians, even as i came a he cos o
lingering high unemploymen and widespread financial hardships. Conservaive law-
makers need o own up o heir ailure o producively engage in designing, never mind
passing, policies ha could have helped bring abou sronger economic and job growh
and more economic securiy or American amilies.
-
8/12/2019 Economic Snapshot: June 2014
2/7
2 Center for American Progress | Economic Snapshot: June 2014
Conservaive lawmakers have a chance o re-engage in helping American amilies.
Tey should sop wasing heir ime rying o undo he Affordable Care Ac, or ACA,
which has already helped millions o amilies gain real economic securiy by elimina-
ing lieime healh insurance limis, slowing he growh o healh insurance coss, and
expanding healh insurance coverage o millions o people who did no have i beore.
Insead, hey should ocus heir energy on biparisan policies ha can proec socieys
mos vulnerable members, such as raising he minimum wage; exending emergencyunemploymen insurance benefis; puting Social Securiy Disabiliy Insurance on a
long-erm, solid ooing; and passing policies ha can boos economic growh, such as
inrasrucure invesmens in roads, bridges, and schools.
American middle-class amilies deserve a Congress ha akes heir sruggles seriously
no a Congress ha is sill working or he lucky ew insead o or he middle class five
years afer he end o he Grea Recession.
1. Economic growth lags behind similar points in prior business cycles. Gross domes-
ic produc, or GDP, ell sharply in he firs quarer o 2014 a an inflaion-adjusedannual rae o 2.9 percen. Domesic consumpion increased by an annual rae o 1
percen, and housing spending subsanially shrank by 4.2 percen, while business
invesmen growh ell a a rae o 1.2 percen. Expors decreased by 8.9 percen in
he firs quarer, and governmen spending increased by 0.6 percen.1Te economy
expanded by 11 percen rom June 2009 o March 2014is slowes expansion dur-
ing recoveries o a leas equal lengh.2Policymakers need o srenghen growh, as
he economys momenum is sill oo low o end he sruggles o Americas middle
class. Policies could include invesmens in inra-
srucure and educaion o overcome lackluser
privae business invesmens.
2. Improvements to U.S. competitiveness lag
behind previous business cycles.Produciviygrowh, measured as he increase in inflaion-
adjused oupu per hour, is key o increasing
living sandards, as i means ha workers are
geting beter a doing more in he same amoun
o ime. Slower produciviy growh means ha
new economic resources available o improve
living sandards are growing more slowly han
would be he case wih aser produciviy
growh. U.S. produciviy rose 6.5 percen rom
June 2009 o March 2014, he firs 19 quarers
o he economic recovery since he end o he
Grea Recession.3Tis compares o an average o
12.4 percen during all previous recoveries o a
FIGURE 1
GDP growth in recovery in comparisonto previous recoveries
90
120
125
130
115
110
105
100
95
2 4 6 8 10 12 14 16 18 20
Growth
index(lastquarterofrecession=100)
Mar 61
Mar 75
Dec 82
Mar 91
Dec 01
Jun 09
Number of quarters of economic recovery
Recovery after the Great Recession
Source: Authors calculations based on Bureau of Economic Analysis, National Income and Product Accounts
(U.S. Department of Commerce, 2014). Calculations only done for recoveries that have lasted at least four years.
-
8/12/2019 Economic Snapshot: June 2014
3/7
3 Center for American Progress | Economic Snapshot: June 2014
leas equal lengh.4No previous recovery had lower produciviy growh han he cur-
ren one, and policymakers need o srenghen educaion, research and developmen,
and inrasrucure invesmens as imporan firs seps o lay a oundaion or aser
uure produciviy growh.
3. The housing market continues to recover from historic lows. New-home salesamouned o an annual rae o 504,000 in May 2014a 16.9 percen increase romhe 431,000 homes sold in May 2013 bu well below he hisorical average o 698,000
homes sold beore he Grea Recession.5Te median new-home price in May 2014
was $282,800, up rom one year earlier.6Exising-home sales were down by 6.8 per-cen in April 2014 rom one year earlier, bu he median price or exising homes was
up by 5.2 percen during he same period.7Home sales have o go a lo urher, given
ha homeownership in he Unied Saes sood a 64.8 percen in he firs quarer o
2014, down rom 68.2 percen beore he 2007 recession. Te curren homeowner-
ship raes are similar o hose recorded in 1996, well beore he mos recen housing
bubble sared.8A srong housing-marke recovery can boos economic growh, andhere is sill pleny o room or he housing marke o provide more simulaion o heeconomy more broadly han i did beore he recen slowdown. Te fledgling hous-
ing recovery could regain is srengh i policymakers suppor policies ha encourage
aser income growhsuch as a hike in he minimum wageand have a greaer
emphasis on good jobs, such as an expansion o appreniceships.
4. The outlook for federal budgets improves.Te nonparisan Congressional BudgeOffice, or CBO, esimaed in April 2014 ha he ederal governmen will have a
deficihe difference beween axes and spendingo 2.8 percen o GDP or fiscal
year 2014, which runs rom Ocober 1, 2013, o Sepember 30, 2014.9Tis defici
projecion is down rom 4.1 percen in FY 2013.10
Tis projeced defici or FY 2014is slighly beter han wha CBO prediced in February 2014, when i esimaed a
defici o 3 percen o GDP or FY 2014.11Te esimaed defici or FY 2014 is much
smaller han i was in previous years, due o a number o measures ha policymakers
have already aken o slow spending growh and raise a litle more revenue han was
expeced jus las year. Te slowdown in healh care cossa resul parially atrib-
ued o provisions wihin he ACAhas significanly conribued o hese shrink-
ing defici projecions.12Te improving fiscal oulook generaes breahing room or
policymakers o ocus heir atenion on argeed, efficien policies ha promoe long-
erm growh and job creaion as well as defici reducion.
5. Moderate labor-market recovery shows less job growth than in previous business
cycles. Tere were 7.5 million more jobs in May 2014 han in June 2009. Te privae
secor added 8.2 million jobs during his period. Te loss o some 598,000 sae and
local governmen jobs explains he difference beween he ne gain o all jobs and he
privae-secor gain in his period. Budge cus reduced he number o eachers, bus
drivers, firefighers, and police officers, among ohers.13Te oal number o jobs has
-
8/12/2019 Economic Snapshot: June 2014
4/7
4 Center for American Progress | Economic Snapshot: June 2014
now grown by 5.7 percen during his recovery,
compared wih an average o 11.6 percen dur-
ing all prior recoveries o a leas equal lengh.14
Alhough employmen has finally reached is
prerecession peak, policymakers need o do
much more o creae jobs as Millennialshose
born beween 1980 and 2000 and currenly helarges generaion o Americansbegin o reach
working age.
6. Employment opportunities grow very slowly
for people in their prime earning years. Teemployed share o he populaion rom ages 25
o 54which is unaffeced by he aging o he
overall populaionwas 76.4 percen in May
2014. Tis was jus above he level recorded in
June 2009 and well below he levels recordedsince he mid-1980s and beore he Grea
Recession sared in 2007. Te employed share
o he populaion has, on average, grown by 3.1
percenage poins a his sage during previous
recoveries o a leas equal lengh.15Waiing or a
healhy recovery simply is no enough o help workers. Policymakers need o sep in
o generae aser growh ha can resul in more jobs or all workers.
7. Employer-sponsored benefits disappear.Te share o people wih employer-spon-
sored healh insurance dropped rom 59.8 percen in 2007 o 54.9 percen in 2012,he mos recen year or which daa are available.16Te share o privae-secor workers
who paricipaed in a reiremen plan a work ell o 39.4 percen in 2012, down rom
41.5 percen in 2007.17Families now have less economic securiy han in he pas
due o ewer employmen-based benefis, which requires hem o have more privae
savings o make up he difference. Te ACA appears o se a welcome counerpoin
o he rend o disappearing healh insurance benefis. Since he ACAs markeplace
open enrollmen period began in Ocober 2013, he uninsured rae has dropped o
13.4 percen, he lowes monhly rae recorded since 2008.18Moreover, uninsured
raes coninue o decline among communiies o color and low-income Americans.
Since January 2014, he uninsured rae has dropped by 7.1 percen or Arican
Americans, 5.5 percen or Hispanics, and 5.5 percen or lower-income Americans.19
FIGURE 2
Employment-to-population ratio
for 2554 year-olds, 19472014
60%
80%
65%
70%
75%
85%
Share
ofpopulation(
inp
ercent)
1948
1954
1960
1965
1971
1977
1983
1989
1996
2002
2008
2014
Source: Bureau of Labor Statistics, Current Population Survey (U.S. Department of Labor, 2014).
-
8/12/2019 Economic Snapshot: June 2014
5/7
5 Center for American Progress | Economic Snapshot: June 2014
8. Some communities continue to struggle
disproportionately from unemployment. Te
unemploymen rae remained seady a 6.3
percen in May 2014: Te Arican American
unemploymen rae was 11.5 percen; he
Hispanic unemploymen rae was 7.7 percen;
and he whie unemploymen rae was 5.4 per-cen. Meanwhile, youh unemploymen sood a
19.2 percen. Te unemploymen rae or people
wihou a high school diploma icked up o 9.1
percen, compared wih 6.5 percen or hose
wih a high school degree, 5.5 percen or hose
wih some college educaion, and 3.2 percen or
hose wih a college degree.20Populaion groups
wih higher unemploymen raes have sruggled
disproporionaely more amid he weak labor
marke han whie workers, older workers, andworkers wih more educaion. argeed policy
inervenions such as exended unemploymen
insurance benefis would offer much-needed help or some populaion groups, such
as sruggling youh and communiies o color.
9. The rich continue to pull away from most Americans. Incomes o households in he
95h percenilehose wih incomes o $191,000 in 2012, he mos recen year or
which daa are availablewere more han nine imes he incomes o households in
he 20h percenile, whose incomes were $20,599. Tis is he larges gap beween he
op 5 percen and he botom 20 percen o households since he U.S. Census Bureausared keeping records in 1967. Median inflaion-adjused household income sood
a $51,017 in 2012, is lowes level in inflaion-adjused dollars since 1995. And he
povery rae remains higha 15 percen in 2012as he economic slump conin-
ues o ake a massive oll on he mos vulnerable ciizens.21Higher minimum wages,
an improved Earned Income ax Credi and he closure o ax loopholes or he rich
would be criical firs seps or policymakers o address income inequaliy.
10. Corporate profits stay elevated near precrisis peaks.Inflaion-adjused corpo-
rae profis were 100 percen larger in March 2014 han in June 2009. Te afer-ax
corporae profi raeprofis o oal assessood a 3.4 percen in March 2014
higher han any profi rae recorded since Sepember 1979.22Corporae profis
recovered quickly oward he end o he Grea Recession and have sayed high since
hen. Addressing income inequaliy ha arises rom he rich receiving ousized ben-
efis rom heir wealh hrough ax reorm is a crucial policy prioriy.
FIGURE 3
U.S. poverty rate, 2007 to 2012
54%
56%
58%
55%
57%
59%
60%
2007 2008 2009 2010 2011 2012
59.8%58.9%
56.1%
55.3%55.1%
54.9%
Source: Bureau of Labor Statistics, Current Population Survey(U.S. Department of Labor, 2014).
-
8/12/2019 Economic Snapshot: June 2014
6/7
6 Center for American Progress | Economic Snapshot: June 2014
11. Corporations spend much of their money to keep shareholders happy. From
December 2007when he Grea Recession saredo December 2013, nonfi-
nancial corporaions spen, on average, 97 percen o heir afer-ax profis on divi-
dend payous and share repurchases.23In shor, almos all o nonfinancial corporae
afer-ax profis wen o keep shareholders happy during he curren business cycle.
Nonfinancial corporaions also held, on average, 5.3 percen o all o heir asses in
cashhe highes average share since he business cycle ha ended in December1969. Nonfinancial corporaions spen, on average, 167 percen o heir afer-ax
profis on capial expendiures or invesmensby selling oher asses and by bor-
rowing. Tis was he lowes raio since he business cycle ha ended in 1960. U.S.
corporaions have prioriized keeping shareholders happy and building up cash
over invesmens in srucures and equipmen, highlighing he need or regulaory
reorm ha incenivizes corporaions o inves in research and developmen, manu-
acuring plans and equipmen, and workorce developmen.
12. Poverty is still widespread. Te povery rae remained fla a 15 percen in 2012he
mos recen year or which daa are availablewhich is an increase o 0.7 percenagepoins over he hree years o he recovery, 2009 o 2012. Te povery rae has allen,
on average, by 0.7 percenage poins in previous recoveries o a leas equal lengh.
Moreover, some populaion groups suffer rom much higher povery rae han ohers.
Te Arican American povery rae, or insance, was 27.2 percen, and he Hispanic
povery rae was 25.6 percen, while he whie povery rae was 9.7 percen. Te povery
rae or children under age 18 sood a 21.8 percen. More han one-hird o Arican
American children37.9 percenlived in povery in 2012, compared wih 33.8 per-
cen o Hispanic children and 12.3 percen o whie children.24Srenghening economic
securiy by adoping measures such as he Universal Savings Credi and he expansion
o social saey ne programssuch as SNAP and Medicaidcan help us reduce pov-ery and provide opporuniies o Americans who need hem mos.
13. Household debt is still high. Household deb equaled 103.4 percen o afer-ax
income in March 2014, down rom a peak o 129.7 percen in December 2007. 25A
reurn o deb growh oupacing income growh, which was he case prior o he sar o
he Grea Recession in 2007, rom already-high deb levels could evenually slow eco-
nomic growh again. Tis would be especially rue i ineres raes also rise rom hisori-
cally low levels due o a change in he Federal Reserves policies. Consumers would have
o pay more or heir deb, and hey would have less money available or consumpion
and saving. Policymakers should hereore ocus on creaing high-qualiy jobs so ha
people do no need o borrow as much money as hey did in he pas and on regulaory
reorm o help millions o amilies avoid high and derimenal coss o credi.
Chrisian E. Weller is a Senior Fellow a he Cener for American Progress and a professor
in he Deparmen of Public Policy and Public Affairs a he McCormack Graduae School
of Policy and Global Sudies a he Universiy of Massachusets, Boson. Jackie Odum is a
Special Assisan for he Economic Policy eam a he Cener.
-
8/12/2019 Economic Snapshot: June 2014
7/7
7 Center for American Progress | Economic Snapshot: June 2014
Endnotes
1 Bureau of Economic Analysis, National Income and ProductAccounts(U.S. Department of Commerce, 2014).
2 Ibid.
3 Calculations are based on productivity growth (outputper hour) for nonfarm businesses from Bureau of LaborStatistics, Current Employment Statistics (U.S. Department of
Labor, 2014).
4 Ibid.
5 The historical average refers to the average annualizedmonthly residential sales from January 1963, when theCensus data started, to December 2007, when the GreatRecession started. Calculations are based on Bureau of theCensus, New Residential Sales Historical Data(U.S. Depart-ment of Commerce, 2014).
6 Ibid.
7 National Association of Realtors, April Existing-Home SalesShow Modest Improvement Behind Gaining Inventory,Press release, May 22, 2014.
8 Bureau of the Census, Housing Vacancies and Homeowner-ship(U.S. Department of Commerce, 2014).
9 Congressional Budget Office, Updated Budget Projections:2014 to 2024 (2014), available athttp://www.cbo.gov/sites/default/files/cbofiles/attachments/45229-UpdatedBudget-Projections_2.pdf.
10 Ibid.
11 Ibid.
12 Richard Kogan and William Chen, Projected Ten-YearDeficits Have Shrunk by Nearly $5 Trillion Since 2010, MostlyDue to Legislative Changes (Washington: Center on Budgetand Policy Priorities, 2014), available at http://www.cbpp.org/cms/?fa=view&id=4106.
13 Employment-growth data are calculated based on Bureauof Labor Statistics, Current Employment Statistics.
14 Ibid.
15 Calculations based on Bureau of Labor Statistics, CurrentPopulation Survey(U.S. Department of Labor, 2014).
16 Bureau of the Census, Income, Poverty, and Health InsuranceCoverage in the United States: 2012 (U.S. Department of Com-merce, 2013). This report is occasionally referred to as the
poverty report.
17 Craig Copeland, Employment-Based Retirement PlanParticipation: Geographic Differences and Trends, 2012(Washington: Employee Benefit Research Institute, 2013).
18 Jenna Levy, U.S. Uninsured Rate Drops to 13.4%, Gal-lup, May 5, 2014, available at http://www.gallup.com/poll/168821/uninsured-rate-drops.aspx.
19 Ibid.
20 Unemployment numbers are taken from Bureau of LaborStatistics, Current Population Survey.
21 Bureau of the Census, Income, Poverty, and Health InsuranceCoverage in the United States: 2012.
22 Profit rates are calculated based on data from Board of Gov-ernors of the Federal Reserve System, Z.1 Release--FinancialAccounts of the United States (2014). Inflation adjustmentsare based on the Personal Consumption Expenditure Indexfrom Bureau of Economic Analysis, National Income andProduct Accounts.
23 Calculations are based on Board of Governors of the FederalReserve System, Z.1 Release--Financial Accounts of theUnited States.
24 Calculations are based on Bureau of the Census, Income,Poverty, and Health Insurance Coverage in the United States:2012.
25 Calculations are based on Board of Governors of the FederalReserve System, Z.1 Release--Financial Accounts of theUnited States.
http://www.cbo.gov/sites/default/files/cbofiles/attachments/45229-UpdatedBudgetProjections_2.pdfhttp://www.cbo.gov/sites/default/files/cbofiles/attachments/45229-UpdatedBudgetProjections_2.pdfhttp://www.cbo.gov/sites/default/files/cbofiles/attachments/45229-UpdatedBudgetProjections_2.pdfhttp://www.cbpp.org/cms/?fa=view&id=4106http://www.cbpp.org/cms/?fa=view&id=4106http://www.gallup.com/poll/168821/uninsured-rate-drops.aspxhttp://www.gallup.com/poll/168821/uninsured-rate-drops.aspxhttp://www.gallup.com/poll/168821/uninsured-rate-drops.aspxhttp://www.gallup.com/poll/168821/uninsured-rate-drops.aspxhttp://www.cbpp.org/cms/?fa=view&id=4106http://www.cbpp.org/cms/?fa=view&id=4106http://www.cbo.gov/sites/default/files/cbofiles/attachments/45229-UpdatedBudgetProjections_2.pdfhttp://www.cbo.gov/sites/default/files/cbofiles/attachments/45229-UpdatedBudgetProjections_2.pdfhttp://www.cbo.gov/sites/default/files/cbofiles/attachments/45229-UpdatedBudgetProjections_2.pdf