economic snapshot for march 2013

7/29/2019 Economic Snapshot for March 2013

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1 Center or American Progress | Economic Snapshot or March 2013

Economic Snapshot for March 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

March 2013

Te economy and he labor marke are mainaining modes momenum, despie coninu-

ing obsacles such as high levels o household deb, a lingering nancial crisis in Europe,

and coninued scal uncerainy in he Unied Saes. Unemploymen remains a serious

economic hardship or millions o Americans, paricularly or hose who have been look-ing or a job longer han six monhs. Policymakers can and should do more o srenghen

economic and job growh in order o help he mos vulnerable in his economy.

Over he pas ew years, argeed policies have producively inervened in he economy

and in he labor marke. Tis has also highlighed he policies goals. Policymakers can,

or insance, inves in inrasrucure, which oses weak business invesmen and expor

growh, and lays he oundaion or sronger privae-secor growh in he uure as he cos

o doing business in he Unied Saes declines wih beter inrasrucure. Policymakers

should also consider boosing personal incomes or he mos vulnerable Americans by

implemening a higher ederal minimum wage, which would increase consumpion, andhelp low-income households ge ou rom under heir massive amouns o deb aser.

Similarly, public policy can ease he sill-high burden o deb by aciliaing he renancing

o exising morgages, which are he single larges share o household deb. Tese acions

could seriously help sruggling Americans and would cerainly boos he economy.

1. Economic growth slowed markedly at the end of 2012. Gross domesic produc,

or GDP, was essenially a in he ourh quarer o 2012, increasing slighly a an

annual rae o 0.1 percen. Domesic consumpion increased by an inaion-adjused

annual rae o 2.1 percen; housing spending grew by 17.5 percen; and business

invesmen acceleraed by 9.7 percen. In he ourh quarer o 2012, however,

expors ell by 3.9 percen, and governmen spending shrank by 0.7 percen.1 Policy

soluions should hereore aim o ease he srain o scal auseriy on he economy

by dampening spending cus, and hey should boos domesic privae-secor eco-

nomic aciviy o ose he all-o in overseas demand.


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FIGURE 1

Monthly job change since start of Great Recession in 2008

Source: Bureau of Labor Statistics, Current Employment Statistics (Department of Labor, 2013).

Job changes (in thousands)

January

2008

July

2008

January

2009

July

2009

January

2010

July

2010

January

2011

July

2011

January

2012

July

2012

-1,000

-800

-600

-400

-200

0

200

400

600

January

2013

2. The moderate labor market recovery continues in its fourth year.Tere were 4.5million more jobs in February 2013 han in June 2009 when he economic recov-

ery ocially sared. Te privae secor added 5.2 million jobs during his period.

Te loss o nearly 722,000 sae and local governmen jobs explains he dierence

beween he ne gain and he privae-secor gain in his period, as budge cus

reduced he number o eachers, bus drivers, reghers, and police ocers, among

ohers.2 Job creaion should be a op policy prioriy since privae-secor job growhis sill oo weak o quickly overcome oher job losses and rapidly lower he unem-

ploymen rae. Once again, removing he uncerainy over scal changes is a key sep

oward srenghening economic and job growh.

3. Long-term unemployment stays high. Te

unemploymen rae sood a 7.7 percen in

February 2013. And long-erm unemploy-

mendened as people who are ou o work

and have been looking or a job or more han

six monhsicked back up again. In February2013, 40.2 percen o he unemployed were

considered long-erm unemployed. Te average

lengh o unemploymen also grew slighly in

February 2013, rising o 36.9 weeks.3 Tose

ou o a job or a long ime sruggle o regain

employmen because heir skil ls arophy, and

re-enry ino a new job becomes increasingly

harder. Te coninuaion o exended unem-

ploymen insurance benes as par o he

resoluion o he scal showdown on January1, 2013, was hus a welcome policy ha helped

many o hose mos vulnerable o economic shocks.

4. Labor-market troubles fall especially hard on communities of color, young work-

ers, and Americans with less education. Te Arican American unemploymen

rae in February 2013 was 13.8 percen; he Hispanic unemploymen rae was 9.7

percen; and he whie unemploymen rae was 6.8 percen. Te populaion groups

wih higher unemploymen raeshose ha ypically also have low incomes and

litle wealhhave 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.

Meanwhile, youh unemploymen sood a 25.1 percen. Te unemploymen rae or

people wihou a high school diploma icked down slighly o 11.2 percencom-

pared o 7.9 percen or hose wih a high school degree, 6.7 percen or hose wih

some college educaion, and 3.8 percen or hose wih a college degree.4


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5. Household incomes continue to drop amid prolonged weaknesses in the labor

market.Median inaion-adjused household income sood a $50,054 in 2011he mos recen year or which daa is availableis lowes level in inaion-adjused

dollars since 1995. Median income ell by 1.5 percen in 2011, dropping or he

ourh year in a row. American amilies as a whole have experienced no income

gains during he curren economic recovery since 2009, exacerbaing he losses ha

occurred during he Grea Recession.5

6. Income inequality on the rise. Incomes o households in he 95h percenilewih

incomes o $186,000 in 2011were more han nine imes he incomes o house-

holds in he 20h percenile, whose incomes were $20,262. Tis is he larges gap

beween he op ve percen and he botom 20 percen o households since he U.S.

Census Bureau sared keeping record in 1967.6

7. Poverty stays high. Te povery rae ell o 15 percen in 2011, down rom 15.1

percen in 2010. Te Arican American povery rae was 27.6 percen; he Hispanic

povery rae was 25.3 percen; and he whie rae was 9.8 percen. Te poveryrae or children under he age o 18 sood a 21.9 percen. More han one-hird o

Arican American children38.8 percenlived in povery in 2011, compared o

34.1 percen o Hispanic children, and 12.5 percen o whie children.7 Te pro-

longed economic slump, ollowing an excepionally weak labor marke beore he

crisis, has aken a massive oll on he mos vulnerable ciizens.

8. Employer-sponsored benefits disappear.Teshare o people wih employer-sponsored

healh insurance dropped rom 59.8 percen in

2007 o 55.1 percen in 2011, he mos recenyear or which daa is available.8 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 2007.9 Families

now have less economic securiy han in he

pas due o ewer employmen-based benes,

which requires more privae savings o make

up he dierence.

9. Family wealth losses still linger. In December2012, oal amily wealh was down $8.4 ril-

lion (in 2012 dollars) rom March 2007is

las peak. Homeowners on average own only 46.6 percen o heir homescom-

pared o he long-erm average o 61 percen beore he Grea Recessionwih

he res owed o banks.10 Homeowners massive deb slows household spending

growh, as households sil l do no have a lo o collaeral or banks o loosen heir

FIGURE 2

Wealth to personal disposable income, 1952 to 2012

Source: Board of Governors, Federal Reserve System, Release Z.1 Flow of Funds Accounts of the United States (2012).

Percent of after-tax income

0%

200%

400%

600%

800%

March 1952 March 1967 March 1982 March 1997 March 2012


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FIGURE 3

Annual new home sales, 1963 to 2013

Source: Bureau of the Census, New Residential Sales Historical Data (Department of Commerce, 2013).

New home sales (in thousands)

0

300

600

900

1,200

1,500

Janu

ary1

963

Janu

ary1

966

Janu

ary1

969

Janu

ary1

972

Janu

ary1

975

Janu

ary1

978

Janu

ary1

981

Janu

ary1

984

Janu

ary1

987

Janu

ary1

990

Janu

ary1

993

Janu

ary1

996

Janu

ary1

999

Janu

ary2

001

Janu

ary2

004

Janu

ary2

007

Janu

ary2

010

Janu

ary2

013

lending sandards, and households spend less han hey oherwise would on new

homes and on oher large-icke iems.

10.Household debt is still high. Household deb equaled 105.5 percen o afer-ax

income in December 2012, down rom a peak o 126 percen in March 2007.11 Te

unprecedened all in deb over he pas ew years is a resul o igher lending san-

dards, alling ineres raes, massive oreclosures, and increased household saving.Bu unless incomes rise aser han hey have in he pas, urher deleveraging will

likely slow since mos acors ha helped reduce household deb in he pas have

slowed or disappeared, such as alling ineres raes and he payroll ax holiday. Tis

high deb could coninue o slow economic growh, as households ocus on saving

raher han on spending.

11.The housing market is finally recovering from historic lows. New home sales

amouned o an annual rae o 437,000 in January 2013a 28.9 percen increase

rom he 339,000 homes sold in January 2012, bu well below he hisorical average

o 698,000 beore he Grea Recession.12

Te median new home price in January2013 was 2.1 percen higher han one year earlier.13Exising home sales were up

by 10.2 percen in February 2013 rom one

year earlier, and he median price or exising

homes was up by 11.6 percen during he same

period.14 Te housing marke could poenially

grow and conribue o economic progress

because he recovery in he spring o 2012

sared rom hisorically low home sales, and

he housing marke ell hroughou mos o he

recovery. Te edgling housing recovery couldgain urher srengh i policymakers ocus on

personal income gains in he near erm.

12.Homeowners distress remains high. Even

hough morgage roubles have gradually eased

since March 2010, nearly one in nine mor-

gages is sill delinquen or in oreclosure. In

he ourh quarer o 2012, he share o mor-

gages ha were delinquen was 7.1 percen, and he share o morgages ha were

in oreclosure was 3.7 percen.15 Many amilies delayed and deauled on morgage

paymens amid high unemploymen 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 house-

holds lower heir deb burdens hrough renancing help and deb orgiveness.


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13.Near pre-crisis peak profits are not reflected in investment data. Inaion-adjused corporae pros were 85.2 percen larger in December 2012 han in June

2009, when he economic recovery sared. Te afer-ax corporae pro raepro-

is o oal assessood a 3.1 percen in December 2012, nearing he previous

peak afer-ax pro rae o 3.2 percen ha occurred prior o he Grea Recession.16

Corporaions used heir resources or purposes oher han invesmens in plans and

equipmen. Te share o invesmen ou o GDP sayed low, wih 10.4 percen inhe ourh quarer o 2012, compared o an average o 10.9 percen during he prior

business cycle rom March 2001 o December 2007.17

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 or Economic Policy a he Cener.


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Endnotes

1 Bureau o Economic Analysis, National Income and ProductAccounts (U.S. Department of Commerce, 2013).

2 Employment growth data are calculated based on Bureau oLabor Statistics, Current Employment Statistics (U.S. Depart-ment of Labor, 2013). The Current Employment Statistics arealso known as the payroll survey.

3 Unemployment numbers are taken rom Bureau o LaborStatistics, Current Population Survey (U.S. Department ofLabor, 2013). The Current Population Survey is also known asthe household survey.

4 Ibid.

5 Data or amily incomes are rom Bureau o the Census,Income, Poverty, and Health Insurance Coverage in the UnitedStates: 2011 (U.S. Department of Commerce, 2012). This reportis occasionally referred to as the poverty repor t.

6 Other measures o income dispersion also show a growinggap between amilies in the top 5 percent, top 10 percent,and top 20 percent relative to amilies in the bottom 20percent and bottom 50 percent. Ibid.

7 Ibid.

8 Ibid.

9 Craig Copeland, Employment-Based Retirement Plan Par-ticipation: Geographic Dierences and Trends: 2011/2007(Washington: Employee Benets Research I nstitute, 2012).

10 Wealth calculations are based on Board o Governors, Fed-eral Reserve System, Release Z.1 Flow o Funds Accounts othe United States (2013). Real wealth is the nominal wealthdefated by the price index or the Personal ConsumptionExpenditure Index. The Personal Consumption ExpenditureIndex is rom Bureau o Economic Analysis, National Incomeand Product Accounts.

11 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.

12 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 ofCommerce, 2013).

13 Ibid.

14 National Association o Realtors, Existing-Home Sales andPrices Continue to Rise in February (2013).

15 Data are taken rom Mortgage Bankers Association, Na-tional Delinquency Survey (2013).

16 Prot rates are calculated based on data rom the Board oGovernors, Federal Reserve System, (2013) Release Z.1 Flowo Funds Accounts o the United States. Infation adjust-ments are based on the Personal Consumption ExpenditureIndex rom the Bureau o Economic Analysis, NationalIncome and Product Accounts.

17 Authors calculation based on ibid.

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