economic snapshot: november 2013

8/13/2019 Economic Snapshot: November 2013

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1 Center for American Progress | Economic Snapshot: November 2013

Economic Snapshot: November 2013

Christian E. Weller on the State of the Economy

By Christian E. Weller and Sam Ungar November 27, 2013

Te U.S. economy coninued is slow bu seady recovery in November, leaving room

or policymakers o enac policies ha could accelerae job creaion and economic

growh. Te curren budge negoiaions in Congress offer such an opporuniy o creae

a pro-growh budge and end he fiscal uncerainy ha has hampered business inves-

men over he pas wo and a hal years.

Faser growh requires sharper increases in business invesmens. New analysis rom he

Cener or American Progress, however, shows ha businesses slowed he pace o inves-

ing in lae 2011 and urher slowed i in 2013, as Congress hobbled rom one fiscal crisis

o he nex manuacured by radical conservaives.1Te fiscal uncerainy slowed inves-

men growh rom an already modes pace. Moreover, business invesmen has also been

slow because o slow income growh; ha is, amilies are no increasing consumpion

as enough o warran aser invesmens.

Businesses have he wherewihal o inves more. Profis are hovering near prereces-sion highs afer recovering quickly rom he dephs o he Grea Recession. However,

corporaions have kep much o his addiional money in near-record sockpiles o cash,

or have used i o keep shareholders happy hrough sock repurchases and dividend

payous. Invesing in new equipmen such as compuers and rucks and srucures such

as manuacuring plans and office buildings has been a lower prioriy.

Bu policymakers can help grow our economy. Tis requires ocusing on aser wage and

income growh, invesing in boh shor-erm and long-erm American compeiiveness,

and ending fiscal brinksmanship. In shor, i requires enacing he smar progressive policies

conained in CAPs landmark repor, 300 Million Engines o Growh, 2published in June.

Wih posiive signs in his monhs labor repor and upward revisions over he pas ew

monhs,3i is becoming increasingly eviden ha he exising recovery is sable, bu no

robus enough o gain necessary momenum o quickly lower he unemploymen rae

and raise living sandards or millions o sruggling amilies. Focusing on job creaion

and invesmen expansions raher han harmully disrupive fiscal squabbles can creae a

much sronger and sel-susaining economic recovery.


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1. The economy continues to grow slowly. Grossdomesic produc, or GDP, increased in he

hird quarer o 2013 a an inflaion-adjused

annual rae o 2.8 percen. Domesic consump-

ion increased by an annual rae o 1.5 percen,

housing spending subsanially grew by 14.6

percen, while business invesmen growhslowed o 1.6 percen. Expors increased by

4.5 percen in he firs quarer and governmen

spending was essenially fla wih an increase

o only 0.2 percen.4Tese numbers show ha

here is room o expand growh in all areas o

he economy. Policy soluions should hereore

aim o ease he srain o U.S. fiscal auseriy on

he economy, creae fiscal cerainy, and inves

in people, inrasrucure, and innovaion.

2. The moderate labor-market recovery continues in its fourth year. Tere were 6

million more jobs in Ocober 2013 han in June 2009. Te privae secor added

6.7 million jobs during his period. Te loss o more han 621,000 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.5Job 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

defici reducion a all coss, could creae millions o jobs ha Americas middle classdesperaely needs.

3. Some communities continue to struggle

disproportionately from unemployment.Teunemploymen rae sood a 7.3 percen in

Ocober 2013. Te Arican American unem-

ploymen rae was 13.1 percen in Ocober

2013, he Hispanic unemploymen rae was

9.1 percen, and he whie unemploymen rae

was 6.3 percen. Meanwhile, youh unemploy-

men sood a 22.2 percen. Te unemploymen

rae or people wihou a high school diploma

icked up o 10.9 percen, compared o 7.3

percen or hose wih a high school degree, 6.3 percen or hose wih some college

educaion, and 3.8 percen or hose wih a college degree.6Populaion groups wih

higher unemploymen raes have sruggled disproporionaely more amid he weak

FIGURE 1

Economic growth over the first four years of a recovery

120

110

100

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 1817

130

Growthindex(lastquarte

rofrecession=100)

Number of quarters of economic recovery

Recovery after the Great Recession

March 61

March 75

December 82

March 91

December 01June 09

Authors calculations based on U.S. Bureau of Economic Analysis, National Income and Product Accounts(U.S.

Department of Commerce, 2013). Calculations only done for recoveries that have lasted at least four years.

FIGURE 2

October 2013 unemployment rate by race

6.3%

9.1%

13.1%

White

Hispanic

African American

Source: U.S. Bureau of Labor Statistics, Current Population Survey(U.S. Department of Labor, 2013).


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labor marke han whie workers, older workers, and workers wih more educaion.

Policymakers should heed he recommendaions inAll-In Naiona new book rom

he Cener or American Progress and PolicyLinkon building a srong and diverse

workorce ha draws rom all communiies.7

4. 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 yearor which daa are availablewere more han nine imes he incomes o house-

holds 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 Bureau sared 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 high, a 15 percen in 2012, as he

economic slump coninues o ake a massive oll on he mos vulnerable ciizens.8

5. Poverty stays high.Te povery rae remained fla a 15 percen in 2012, he mosrecen year or which daa are available. Te Arican American povery rae was27.2 percen, he Hispanic povery rae was 25.6 percen, and he whie povery

rae was 9.7 percen. Te povery rae or children under he age o 18 sood

a 21.8 percen. More han one-hird o Arican American children37.9 per-

cenlived in povery in 2012, compared o 33.8 percen o Hispanic children

and 12.3 percen o whie children.9Te prolonged economic slump, ollowing an

excepionally weak labor marke beore he crisis, has aken a massive oll on our

counrys mos vulnerable ciizens.

6. 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.10Te 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 2007.11Families now have less economic securiy han

in he pas due o ewer employmen-based benefis, which requires ha hey have

more privae savings o make up he difference.

7. Family wealth losses still linger.In June 2013, oal amily wealh was down $1.5

rillion in 2013 dollars rom March 2007, is previous peak. On average, homeown-

ers own only 49.8 percen o heir homescompared o he long-erm average o 61

percen beore he Grea Recessionwih he res owed o banks.12Homeowners

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.


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8. Household debt is still high.Household deb equaled 104.3 percen o afer-axincome in June 2013, down rom a peak o 129.5 percen in December 2007.13

Household deb has hovered around 105 percen o afer-ax income or one year

now. Ta is, he unprecedened deleveragingdeb declinerend ha marked

he Grea Recession has sopped.A 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 economic growh again. Tis would be espe-cially rue i ineres raes also rise rom hisorically low levels due o a change in he

Federal Reserves policies and crowd ou household spending on oher iems.

9. The housing market continues to recover from historic lows. New home sales

amouned o an annual rae o 421,000 in Augus 2013a 12.6 percen increase

rom he 374,000 homes sold in Augus 2012 bu well below he hisorical average

o 698,000 homes sold beore he Grea Recession.14Te median new-home price

in Augus 2013 held seady rom one year earlier.15Exising-home sales were up by 6percen in Ocober 2013 rom one year earlier, and he median price or exising homes

was up by 12.8 percen during he same period.16

Home sales have o go a lo urher,given ha homeownership in he Unied Saes sood a 65.3 percen in he hird quar-

er o 2013, down rom 68.2 percen beore he recession. Te curren homeownership

raes are similar o hose recorded in 1996, well beore he mos recen housing bubble

sared.17Tough he housing-marke recovery sared laer han he wider economicrecoveryand sared ou a a record lowlaely he housing marke has conribued

a much-needed boos o economic progress. As such, here is sill pleny o room or

he housing marke o provide more simulaion o he economy more broadly. Te

fledgling housing recovery could gain urher srengh i policymakers suppor eco-

nomic growh and job creaion a he same ime.

10. Corporate profits stay high near pre-crisis peaks. Inflaion-adjused corporae

profis were 84.5 percen larger in June 2013 han in June 2009, when he economic

recovery sared. Te afer-ax corporae-profi raeprofis o oal assessood a

3.2 percen in June 2013, nearing he previous peak afer-ax profi rae o 3.3 percen

ha occurred prior o he Grea Recession.18Bu business invesmen remains low a

he same ime, suggesing ha businesses are hoarding cash and using heir resources

or execuive compensaion and overseas acquisiions insead.

11. Improvements in U.S. competitiveness lag behind previous business cycles.Produciviy growh, measured as he increase in inflaion-adjused oupu per hour,

is key o increasing living sandards. U.S. produciviy has risen by 8.7 percen rom

June 2009 o June 2013, he firs our years o he economic recovery since he end

o he Grea Recession.19Tis compares o an average o 13.1 percen during all

previous recoveries o a leas equal lengh. Only one previous recovery had slighly

slower produciviy growh han he curren one, while all ohers saw much aser

growh han is he case in his recovery. Ta is, produciviy expanded more han 50

percen aser in he pas han during he curren recovery.


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12. Corporate priorities do not lie with invest-

ments.Nonfinancial corporaions spen onaverage 93.1 percen o heir afer-ax profis

beween December 2007when he Grea

Recession saredand June 2013 on divi-

dend payous and share repurchases.20In shor,

almos all o nonfinancial corporae afer-axprofis wen o keep shareholders happy dur-

ing 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

December 1969. And nonfinancial corporaions

spen on average 171.4 percen o heir afer-ax

profisby selling oher asses and by borrow-

ingon capial expendiures or invesmens.

Tis was he lowes raio since he businesscycle ha ended in 1960. U.S. corporaions have prioriized keeping shareholders

happy and building up cash over invesmens in srucures and equipmen.

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. Sam Ungar is a

Research Assisan a he Cener.

FIGURE 3

Productivity growth (output per hour) during the first four

years of a recovery

10%

5%

0

15%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Number of quarters of economic recovery

Average previous recoveries

Current economic recovery

Source: Authors calculations based on productivity growth (output per hour) from U.S. Bureau of Labor

Statistics, Current Employment Statistics(U.S. Department of Labor, 2013)


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Endnotes

1 Christian E. Weller, Amid Fiscal Uncertainty, Businesses Hitthe Pause Button, Center for American Progress, November13, 2013, available at http://www.americanprogress.org/issues/economy/news/2013/11/13/79311/amid-fiscal-uncertainty-businesses-hit-the-pause-button/.

2 Jennifer Erickson and Michael Ettlinger, 300 Million Enginesof Growth: A Middle-Out Plan for Jobs, Business, and aGrowing Economy (Washington: Center for American

Progress, 2013), available at http://www.americanprogress.org/issues/economy/report/2013/06/13/66204/300-million-engines-of-growth/.

3 U.S. Bureau of Labor Statistics, The Employment Situation October 2013(U.S. Department of Labor, 2013), available athttp://bls.gov/news.release/archives/empsit_11082013.pdf.

4 U.S. Bureau of Economic Analysis, National Income andProduct Accounts(U.S. Department of Commerce, 2013).

5 Employment-growth data are calculated based on U.S.Bureau of Labor Statistics, Current Employment Statistics(U.S. Department of Labor, 2013). The Current EmploymentStatistics are also known as the payroll survey. More than 9out of 10 positions that have b een added since June 2010have been full time, which is a positive sign. See Jason Fur-man and Betsey Stevenson, New Data: Most of the Increasein Employment is in Full-Time Positions Since the AffordableCare Act Became Law, Council of Economic Advisers blog,

September 6, 2013, available at http://www.whitehouse.gov/blog/2013/09/06/new-data-most-increase-employ-ment-full-time-positions-affordable-care-act-became-law.

6 Unemployment numbers are taken from U.S. Bureau of La-bor Statistics, Current Population Survey(U.S. Department ofLabor, 2013). The Current Population Survey is also knownas the household survey.

7 Vanessa Crdenas and Sarah Treuhaft, eds.,All-In Nation: AnAmerica that Works for All(Washington: Center for AmericanProgress, 2013), available at http://www.americanprogress.org/issues/race/report/2013/07/24/70540/all-in-nation-an-america-that-works-for-ll/.

8 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 thepoverty report.

9 Ibid.

10 Ibid.

11 Craig Copeland, Employment-Based Retirement PlanParticipation: Geographic Differences and Trends, 2011(Washington: Employee Benefit Research I nstitute, 2012);Craig Copeland, Employment-Based Retirement PlanParticipation: Geographic Differences and Trends, 2007(Washington: Employee Benefit Research I nstitute, 2008).

12 Wealth calculations are based on Board of Governors of theFederal Reserve System, Release Z.1 Financial Accounts ofthe United States (2013). Real wealth is the nominal wealthdeflated by the price index for the Personal ConsumptionExpenditure Index. The Personal Consumption ExpenditureIndex is from U.S. Bureau of Economic Analysis, NationalIncome and Product Accounts.

13 Ibid.

14 The historical average refers to the average annualizedmonthly residential sales from January 1963, when the Cen-sus data start, to December 2007, when the Great Recessionstarted. Calculations are based on Bu reau of the Census,New Residential Sales Historical Data(U.S. Department ofCommerce, 2013).

15 Ibid.

16 National Association of Realtors, Existing-Home Sales and

Prices Continue to Rise in February (2013).

17 Bureau of the Census, Housing Vacancies and Homeowner-ship(U.S. Department of Commerce, 2013).

18 Profit rates are calculated based on data from Board of Gov-ernors of the Federal Reserve System, Release Z.1 FinancialAccounts of the United States. Inflation adjustments arebased on the Personal Consumption Expenditure Indexfrom U.S. Bureau of Economic Analysis, National Income andProduct Accounts.

19 Calculations based on productivity growth (output perhour) from U.S. Bureau of Labor Statistics, Current Employ-ment Statistics.

20 Calculations based on Board of Governors of the Federal Re-serve System, Release Z.1 Financial Accounts of the UnitedStates (2013).
http://www.americanprogress.org/issues/economy/news/2013/11/13/79311/amid-fiscal-uncertainty-businesses-hit-the-pause-button/http://www.americanprogress.org/issues/economy/news/2013/11/13/79311/amid-fiscal-uncertainty-businesses-hit-the-pause-button/http://www.americanprogress.org/issues/economy/news/2013/11/13/79311/amid-fiscal-uncertainty-businesses-hit-the-pause-button/http://www.americanprogress.org/issues/economy/report/2013/06/13/66204/300-million-engines-of-growth/http://www.americanprogress.org/issues/economy/report/2013/06/13/66204/300-million-engines-of-growth/http://www.americanprogress.org/issues/economy/report/2013/06/13/66204/300-million-engines-of-growth/http://bls.gov/news.release/archives/empsit_11082013.pdfhttp://www.whitehouse.gov/blog/2013/09/06/new-data-most-increase-employment-full-time-positions-affordable-care-act-became-lawhttp://www.whitehouse.gov/blog/2013/09/06/new-data-most-increase-employment-full-time-positions-affordable-care-act-became-lawhttp://www.whitehouse.gov/blog/2013/09/06/new-data-most-increase-employment-full-time-positions-affordable-care-act-became-lawhttp://www.americanprogress.org/issues/race/report/2013/07/24/70540/all-in-nation-an-america-that-works-for-ll/http://www.americanprogress.org/issues/race/report/2013/07/24/70540/all-in-nation-an-america-that-works-for-ll/http://www.americanprogress.org/issues/race/report/2013/07/24/70540/all-in-nation-an-america-that-works-for-ll/http://www.americanprogress.org/issues/race/report/2013/07/24/70540/all-in-nation-an-america-that-works-for-ll/http://www.americanprogress.org/issues/race/report/2013/07/24/70540/all-in-nation-an-america-that-works-for-ll/http://www.americanprogress.org/issues/race/report/2013/07/24/70540/all-in-nation-an-america-that-works-for-ll/http://www.whitehouse.gov/blog/2013/09/06/new-data-most-increase-employment-full-time-positions-affordable-care-act-became-lawhttp://www.whitehouse.gov/blog/2013/09/06/new-data-most-increase-employment-full-time-positions-affordable-care-act-became-lawhttp://www.whitehouse.gov/blog/2013/09/06/new-data-most-increase-employment-full-time-positions-affordable-care-act-became-lawhttp://bls.gov/news.release/archives/empsit_11082013.pdfhttp://www.americanprogress.org/issues/economy/report/2013/06/13/66204/300-million-engines-of-growth/http://www.americanprogress.org/issues/economy/report/2013/06/13/66204/300-million-engines-of-growth/http://www.americanprogress.org/issues/economy/report/2013/06/13/66204/300-million-engines-of-growth/http://www.americanprogress.org/issues/economy/news/2013/11/13/79311/amid-fiscal-uncertainty-businesses-hit-the-pause-button/http://www.americanprogress.org/issues/economy/news/2013/11/13/79311/amid-fiscal-uncertainty-businesses-hit-the-pause-button/http://www.americanprogress.org/issues/economy/news/2013/11/13/79311/amid-fiscal-uncertainty-businesses-hit-the-pause-button/

economic snapshot: november 2013

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