economic snapshot: december 2013

8132019 Economic Snapshot December 2013

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1 Center for American Progress | Economic Snapshot December 2013

Economic Snapshot December 2013

Christian E Weller on the State of the Economy

By Christian E Weller and Sam Ungar December 19 2013

People are angry a he policy responses o he economyrsquos subpar perormance because

policymakers seem o have given up rying o help he millions o Americans who are

sill sruggling Policymakers in Washingon or example are now celebraing a bipar-

isan budge deal ha ends exended unemploymen benefis or millions o long-erm

unemployed workers Observers can breahe easier because his ime radical conserva-ives did no hold he governmenrsquos finances hosage o heir demands and anoher

governmen shudown has been avoided I is indeed a very low bar or Americansrsquo

expecaions o policymakers i people are saisfied when hey do no wreak havoc on

governmen finances and he economy

Bu American ciizens should no be saisfied and should demand more All economic

measures ha mater o he majoriy o people991252job growh economic growh pro-

duciviy growh povery reducion and income growh991252have perormed worse in

his recovery which sared in June 2009 han in previous recoveries o a leas equal

lengh1

Middle-class amilies coninue o sruggle in he wake o he Grea Recessionand are looking or help rom heir eleced officials

Te curren economy only works or hose lucky ew wih high incomes who depend

in large measure on corporae profis hrough dividends and sock marke gains or

heir financial well-being Income inequaliy sayed high and increased hroughou he

recovery Corporae profis recovered more quickly han in previous recoveries o very

high levels

Policymakers need o ocus on building an economy ha works or everybody Tis

will no happen overnigh and will require a wide range o comprehensive policies o

grow he economy rom he middle ou Such policies include invesmens in educaion

higher minimum wages more opporuniies o join a union and beter help or people

who wan o save




1 Economic growth lags behind previous recoveries Gross domesic produc or

GDP increased in he hird quarer o 2013 a an inflaion-adjused annual rae o 36

percen Domesic consumpion increased by an annual rae o 14 percen housing

spending subsanially grew by 13 percen while business invesmen growh slowed

o 35 percen Expors increased by 37 percen in he firs quarer and governmen

spending was essenially fla wih an increase o only 04 percen2 Te economy

has now expanded by 102 percen rom June 2009 o Sepember 2013991252is slowesexpansion during recoveries o a leas equal lengh3 Policymakers need o ocus on

srenghening key pars o economic growh paricularly invesmen and expors

wih argeed measures ha go beyond remov-

ing fiscal uncerainy

2 Improvements to US competitiveness lag

behind previous business cycles Produciviy

growh measured as he increase in inflaion-

adjused oupu per hour is key o increasing liv-

ing sandards US produciviy has risen by 64percen rom June 2009 o Sepember 2013 he

firs 17 quarers o he economic recovery since

he end o he Grea Recession4 Tis compares

o an average o 114 percen during all previous

recoveries o a leas equal lengh5 No previous

recovery had lower produciviy growh han

he curren one Produciviy growh is he main

driving orce or he counryrsquos abiliy o raise liv-

ing sandards Weaker produciviy growh han

in he pas will make i harder o build a srongmiddle class requiring policymakersrsquo atenion

o inves in US compeiiveness

3 The housing market continues to recover from

historic lows New-home sales amouned o

an annual rae o 444000 in Ocober 2013991252a

216 percen increase rom he 365000 homes

sold in Ocober 2012 bu well below he hisor-

ical average o 698000 homes sold beore he

Grea Recession6 Te median new-home price

in Ocober 2013 was $245800 down slighly

rom one year earlier7 Exising-home sales

were up by 6 percen in Ocober 2013 rom one

year earlier and he median price or exising

homes was up by 128 percen during he same

period8 Home sales have o go a lo urher

given ha homeownership in he Unied Saes

FIGURE 1

GDP growth in recovery in comparison

to previous recoveries

90

120

125

130

115

110

105

100

95

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

G r o w t h i n d e x ( l a s t q u a r t e r o f r e

c e s s i o n = 1 0 0 )

Mar rsquo61

Mar rsquo75

Dec rsquo82

Mar rsquo91

Dec rsquo01

Jun rsquo09

Number of quarters of economic recovery

Recovery after the Great Recession

Source Authorsrsquo calculations based on US Bureau of Economic Analysis National Income and Product Accounts

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

FIGURE 2

Productivity growth in recovery compared


0

2

4

6

8

10

12

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

Average previous recoveries

Current economic recovery

Source Authorsrsquo calculations based on productivity growth (output per hour) from US Bureau of Labor

Statistics Current Employment Statistics (US Department of Labor 2013)




sood a 653 percen in he hird quarer o 2013 down rom 682 percen beore

he recession Te curren homeownership raes are similar o hose recorded in

1996 well beore he mos recen housing bubble sared9 Alhough he housing-

marke recovery sared laer han he wider economic recovery991252and sared ou

a a record low991252he housing marke has laely 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 housingrecovery could gain urher srengh i policymakers suppor economic growh and

job creaion a he same ime

4 Moderate labor-market recovery shows less job growth than in previous recoveries Tere were 62 million more jobs in November 2013 han in June 2009 Te privae

secor added 69 million jobs during his period Te loss o nearly 620000 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 ohers10 Te oal number o jobs

has now grown by 47 percen during his recovery compared o an average o 116percen during all prior recoveries o a leas equal lengh11 Tose looking or jobs

sill need assisance such as exended unemploymen insurance benefis

5 Employment opportunities grow very slowly for people in their prime earning

years Te employed share o he populaion rom ages 25 o 54991252which is una-

eced by he aging o he overall populaion991252was 759 percen in November 2013

Tis was he same level as in June 2009 and

well below he levels since he mid-1980s and

beore he Grea Recession sared in 2007

Te employed share o he populaion has onaverage grown by 3 percenage poins a his

sage during previous recoveries o a leas

equal lengh12 Specifically here has been

insufficien job growh o creae real economic

opporuniies or people in he mids o heir

main earning years when hey need hose

opporuniies he mos

6 Employer-sponsored benefits disappear Te

share o people wih employer-sponsored

healh insurance dropped rom 598 percen in

2007 o 549 percen in 2012 he mos recen

year or which daa are available13 Te share

o privae-secor workers who paricipaed in

a reiremen plan a work ell o 394 percen

in 2012 down rom 415 percen in 200714

FIGURE 3

Employment-to-population rate for 25ndash54 year-olds

1947ndash2013

60

80

1 9 4 8

1 9 5 3

1 9 5 8

1 9 6 3

1 9 6 8

1 9 7 3

1 9 7 8

1 9 8 3

1 9 8 8

1 9 9 3

1 9 9 8

2 0 0 3

2 0 0 8

2 0 1 3

65

70

75

85

S

h a r e

o f p o p u l a t i o n (

i n p

e r c e n t )

Source US Bureau of Labor Statistics Current Population Survey (US Department of Labor 2013)




Families now have less economic securiy han in he pas due o ewer employ-

men-based benefis which requires hem o have more privae savings o make up

he difference

7 Some communities continue to struggle disproportionately from unemployment Te unemploymen rae sood a 7 percen in November 2013 Te Arican

American unemploymen rae was 125 percen he Hispanic unemploymen rae was 87 percen and he whie unemploymen rae was 62 percen Meanwhile

youh unemploymen sood a 208 percen Te unemploymen rae or people

wihou a high school diploma icked down o 108 percen compared o 73 percen

or hose wih a high school degree 64 percen or hose wih some college educa-

ion and 34 percen or hose wih a college degree15 Populaion groups wih higher

unemploymen raes have sruggled disproporionaely more amid he weak labor

marke han whie workers older workers and workers wih more educaion

8 The rich continue to pull away from most Americans Incomes o households in he

95h percenile991252hose wih incomes o $191000 in 2012 he mos recen year or which daa are available991252were more han nine imes he incomes o households in

he 20h percenile whose incomes were $20599 Tis is he larges gap beween

he op 5 percen and he botom 20 percen o households since he US Census

Bureau sared keeping records in 1967 Median inflaion-adjused household

income sood a $51017 in 2012 is lowes level in inflaion-adjused dollars since

1995 And he povery rae remains high991252a 15 percen in 2012991252as he economic

slump coninues o ake a massive oll on he mos vulnerable ciizens16

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

profis were 85 percen larger in Sepember 2013 han in June 2009 Te afer-axcorporae-profi rae991252profis o oal asses991252sood a 32 percen in Sepember

2013 nearing he previous peak afer-ax profi rae o 33 percen ha occurred

prior o he Grea Recession17 Corporae profis recovered quickly during he eco-

nomic recovery highlighing he biurcaed naure o he economy

10 Corporations spend much of their money to keep shareholders happy From

December 2007991252when he Grea Recession sared991252o Sepember 2013 nonfi-

nancial corporaions spen on average 98 percen o heir afer-ax profis on divi-

dend payous and share repurchases18 In 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 53 percen o all o heir asses in

cash991252he highes average share since he business cycle ha ended in December

1969 Nonfinancial corporaions spen on average 1687 percen o heir afer-ax

profis on capial expendiures or invesmens991252by selling oher asses and by bor-

rowing Tis was he lowes raio since he business cycle ha ended in 1960 US

corporaions have prioriized keeping shareholders happy and building up cash over

invesmens in srucures and equipmen






Endnotes

1 There have been five recoveries that lasted at least 53months since World War II National Bureau of EconomicResearch ldquoBusiness Cycle Expansions and Contractionsrdquo(2013)

2 US Bureau of Economic Analysis National Income andProduct Accounts (US Department of Commerce 2013)

3 Ibid

4 Calculations are based on productivity growth (output perhour) for nonfarm businesses from US Bureau of Labo rStatistics Current Employment Statistics (US Department ofLabor 2013)

5 Ibid

6 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 (US Depart-ment of Commerce 2013)

7 Ibid

8 National Association of Realtors ldquoExisting-Home Sales and

Prices Continue to Rise in Februaryrdquo (2013)

9 Bureau of the Census Housing Vacancies and Homeowner-ship (US Department of Commerce 2013)

10 Employment-growth data are calculated based on USBureau of Labor Statistics Current Employment Statistics

11 Ibid

12 Calculations based on US Bureau of Labor Statistics CurrentPopulation Survey (US Department of Labor 2013)

13 Bureau of the Census Income Poverty and Health InsuranceCoverage in the United States 2012 (US Department of Com-merce 2013) This report is occasionally referred to as thepoverty report

14 Craig Copeland ldquoEmployment-Based Retirement PlanParticipation Geographic Differences and Trends 2012rdquo(Washington Employee Benefit Research Institute 2013)

15 Unemployment numbers are taken from US Bureau ofLabor Statistics Current Population Survey

16 Bureau of the Census Income Poverty and Health InsuranceCoverage in the United States 2012

17 Profit rates are calculated based on data from Board of Gov-ernors of the Federal Reserve System ldquoRelease Z1 FinancialAccounts of the United Statesrdquo (2013) Inflation adjustmentsare based on the Personal Consumption Expenditure Indexfrom US Bureau of Economic Analysis National Income andProduct Accounts

18 Calculations based on Board of Governors of the Federal Re-serve System ldquoRelease Z1 Financial Accounts of the United

Statesrdquo

19 Calculations based on Bureau of the Census Income Povertyand Health Insurance Coverage in the United States 2012

20 Calculations based on Board of Governors of the Federal Re-serve System ldquoRelease Z1 Financial Accounts of the UnitedStatesrdquo




1 Economic growth lags behind previous recoveries Gross domesic produc or

GDP increased in he hird quarer o 2013 a an inflaion-adjused annual rae o 36

percen Domesic consumpion increased by an annual rae o 14 percen housing

spending subsanially grew by 13 percen while business invesmen growh slowed

o 35 percen Expors increased by 37 percen in he firs quarer and governmen

spending was essenially fla wih an increase o only 04 percen2 Te economy

has now expanded by 102 percen rom June 2009 o Sepember 2013991252is slowesexpansion during recoveries o a leas equal lengh3 Policymakers need o ocus on

srenghening key pars o economic growh paricularly invesmen and expors

wih argeed measures ha go beyond remov-

ing fiscal uncerainy

2 Improvements to US competitiveness lag

behind previous business cycles Produciviy

growh measured as he increase in inflaion-

adjused oupu per hour is key o increasing liv-

ing sandards US produciviy has risen by 64percen rom June 2009 o Sepember 2013 he

firs 17 quarers o he economic recovery since

he end o he Grea Recession4 Tis compares

o an average o 114 percen during all previous

recoveries o a leas equal lengh5 No previous

recovery had lower produciviy growh han

he curren one Produciviy growh is he main

driving orce or he counryrsquos abiliy o raise liv-

ing sandards Weaker produciviy growh han

in he pas will make i harder o build a srongmiddle class requiring policymakersrsquo atenion

o inves in US compeiiveness

3 The housing market continues to recover from

historic lows New-home sales amouned o

an annual rae o 444000 in Ocober 2013991252a

216 percen increase rom he 365000 homes

sold in Ocober 2012 bu well below he hisor-

ical average o 698000 homes sold beore he

Grea Recession6 Te median new-home price

in Ocober 2013 was $245800 down slighly

rom one year earlier7 Exising-home sales

were up by 6 percen in Ocober 2013 rom one

year earlier and he median price or exising

homes was up by 128 percen during he same

period8 Home sales have o go a lo urher

given ha homeownership in he Unied Saes

FIGURE 1

GDP growth in recovery in comparison


90

120

125

130

115

110

105

100

95

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

G r o w t h i n d e x ( l a s t q u a r t e r o f r e

c e s s i o n = 1 0 0 )

Mar rsquo61

Mar rsquo75

Dec rsquo82

Mar rsquo91

Dec rsquo01

Jun rsquo09

Number of quarters of economic recovery

Recovery after the Great Recession

Source Authorsrsquo calculations based on US Bureau of Economic Analysis National Income and Product Accounts

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

FIGURE 2

Productivity growth in recovery compared


0

2

4

6

8

10

12

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

Average previous recoveries

Current economic recovery

Source Authorsrsquo calculations based on productivity growth (output per hour) from US Bureau of Labor

Statistics Current Employment Statistics (US Department of Labor 2013)































opporuniies he mos









FIGURE 3


1947ndash2013

60

80

1 9 4 8

1 9 5 3

1 9 5 8

1 9 6 3

1 9 6 8

1 9 7 3

1 9 7 8

1 9 8 3

1 9 8 8

1 9 9 3

1 9 9 8

2 0 0 3

2 0 0 8

2 0 1 3

65

70

75

85

S

h a r e


i n p

e r c e n t )







he difference







































Endnotes



3 Ibid


5 Ibid


7 Ibid





11 Ibid








Statesrdquo

































opporuniies he mos









FIGURE 3


1947ndash2013

60

80

1 9 4 8

1 9 5 3

1 9 5 8

1 9 6 3

1 9 6 8

1 9 7 3

1 9 7 8

1 9 8 3

1 9 8 8

1 9 9 3

1 9 9 8

2 0 0 3

2 0 0 8

2 0 1 3

65

70

75

85

S

h a r e


i n p

e r c e n t )







he difference







































Endnotes



3 Ibid


5 Ibid


7 Ibid





11 Ibid








Statesrdquo








he difference







































Endnotes



3 Ibid


5 Ibid


7 Ibid





11 Ibid








Statesrdquo








Endnotes



3 Ibid


5 Ibid


7 Ibid





11 Ibid








Statesrdquo



economic snapshot: december 2013

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