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8/9/2019 Economic Snapshot: March 2015
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1 Center for American Progress | Economic Snapshot: March 2015
Economic Snapshot: March 2015
Christian E. Weller on the State of the U.S. Economy
By Christian E. Weller and Jackie Odum March 27, 2015
Tis monh’s economic daa shed some ligh on a recovery ha, up unil recenly,
seemed o have been reading waer. Recen daa show ha he labor marke is on he
rise wih he unemploymen rae alling o 5.5 percen, is lowes rae since he end o
he Grea Recession.1 Te unemploymen rae or hisorically vulnerable groups, such as
Arican Americans and Lainos, is finally a or near pre-recession levels. Addiionally,February saw a gain o 295,000 jobs wih an average o almos 300,000 jobs added per
monh over he pas 6 monhs.2 Tere has also been modes economic growh wih
gross domesic produc, or GDP, increasing a a air rae o 2.2 percen beween
Sepember 2014 and December 2014.3
While hese economic gains are promising, hey sill all shor by hisorical sandards.
Te economy has expanded 13.6 percen since he end o he Grea Recession, ar below
he hisorical average o 25.9 percen during prior recoveries o a leas equal lengh.4
Employmen levels show a similar rend: Te oal number o jobs has now grown 7.8
percen during his recovery compared o an average o 14.1 percen during all priorrecoveries o a leas equal lengh.5
Addiionally, alhough he unemploymen rae or Lainos has ully recovered, reurning
o is pre-recession levels, and he unemploymen rae or Arican Americans has
recovered abou 91 percen o he way, hese vulnerable groups, among ohers, coninue
o sruggle disproporionaely compared wih heir whie counerpars.6 Whereas he
whie unemploymen rae remains below he naional average a 4.7 percen, he Arican
American unemploymen rae is more han double ha a 10.3 percen and he Hispanic
unemploymen rae remains high a 6.7 percen.7 Moreover, hese communiies con-
inue o grapple wih dispariies in wages, povery raes, and access o vehicles or saving.
I is quie eviden ha he weigh o he Grea Recession coninues o all on American
workers, and he only way o relieve his pressure is o build an economy ha booss
inclusive prosperiy and bolsers a srong middle class. Policymakers can do so by
ocusing heir effors on measures ha boos wages and provide vulnerable communi-
ies wih a sho oward achieving he American dream.
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2 Center for American Progress | Economic Snapshot: March 2015
1. Economic growth, while positive, has been lackluster for years: GDP increased in
he ourh quarer o 2014 a an inflaion-adjused annual rae o 2.2 percen, afer an
increase o 5 percen in he previous quarer. Domesic consumpion increased by an
annual rae o 4.4 percen, and housing spending rose by 3.8 percen, while business
invesmen grew a a slower rae o 4.4 percen. Expors only increased by 4.5
percen in he ourh quarer, while impors increased by a much aser rae o 10.4
percen, resuling in a widening rade defici. Governmen spending coninues o bea weak spo in he economy as ederal governmen spending ell by 7.3 percen, and
sae and local governmen spending rose only by 1.6 percen. Economic growh
improved in 2014 compared o earlier years o his economic recovery, which began
in June 2009. Bu, he economy needs o mainain and even accelerae is momen-
um in order o creae real economic securiy or America’s amilies. Afer all, he
economy expanded 13.5 percen rom June 2009 o December 2014, ar below he
average o 25.9 percen during recoveries o a leas equal lengh.
2. Improvements to U.S. competitiveness fall behind previous business cycles.
Produciviy growh, measured as he increase in inflaion-adjused oupu per hour,is key o srong economic growh over he longer erm and o increasing living
sandards, as i means ha workers are geting beter a doing more in he same
amoun o ime. Slower produciviy growh hus 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 7 percen rom
June 2009 o December 2014, he firs 22 quarers o he economic recovery since
he end o he Grea Recession.8 Tis compares o an average o 15.3 percen during
all previous recoveries o a leas equal lengh.9 No previous recovery had lower
produciviy growh han he curren one. Tis slow produciviy growhogeher
wih high income inequaliyconribues o he widespread sense o economicinsecuriy and slowing economic mobiliy.
FIGURE 1
Productivity growth in recovery compared with previous recessions
Percentage of growth during first 22 quarters
20%
5%
10%
15%
0%
Average of previous recoveries
Current economic recovery
Source: Calculations are based on productivity growth—output per hour—for nonfarm businesses from Bureau of Labor Statistics, Current
Employment Statistics (U.S. Department of Labor, 2014).
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
15.3%
7.0%
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3 Center for American Progress | Economic Snapshot: March 2015
3. The housing market is still only a shadow of its former self. New-home sales
amouned o an annual rae o 539,000 in February 2015a 24.8 percen increase
rom he 432,000 homes sold in Februrary 2014 bu well below he hisorical
average o 698,000 homes sold beore he Grea Recession.10 Te median new-home
price in February 2015 was $275,500, up rom one year earlier.11 Exising-home sales
rose by 1.2 percen in February 2015 rom one year earlier, and he median price or
exising homes was up by 7.5 percen during he same period.12 Home sales have alo urher o go, given ha homeownership in he Unied Saes sood a 64 percen
in he ourh quarer o 2014, down rom 68.2 percen beore he sar o he
recession a he end o 2007. Te curren homeownership raes are similar o hose
recorded in 1996, well beore he mos recen housing bubble sared.13
A srong
housing-marke recovery can boos economic growh, and here is sill pleny o
room or he housing marke o provide more simulaion o he economy more
broadly han i did beore he recen slowdown.
4. The outlook for federal budgets improves. Te nonparisan Congressional Budge
Office, or CBO, esimaed in March 2015 ha he ederal governmen will have adeficihe difference beween axes and spendingo 2.7 percen o GDP or
fiscal year 2015, which runs rom Ocober 1, 2014, o Sepember 30, 2015.14 Tis
defici projecion is slighly down rom he defici o 2.8 percen o GDP or FY
2014.15 Te esimaed defici or FY 2015 is much smaller han deficis in previous
years due o a number o measures ha policymakers have already aken in order o
slow spending growh and raise more revenue han was expeced jus las year. Te
improving fiscal oulook should generae breahing room or policymakers o ocus
heir atenion on argeed, efficien policies ha promoe long-erm growh and job
creaion, especially or hose groups disproporionaely impaced by high
unemploymen.
5. Moderate labor-market gains follow in part from modest economic growth.
Tere were 10.2 million more jobs in February 2014 han in June 2009. Te privae
secor added 10.8 million jobs during his period. Te loss o some 590,000 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.16 Te oal
number o jobs has now grown by 7.8 percen during his recovery, compared o an
average o 14.1 percen during all prior recoveries o a leas equal lengh.17 Faser
economic growh is necessary o generae more labor-marke momenum.
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4 Center for American Progress | Economic Snapshot: March 2015
FIGURE 2
Employment growth falls behind historical average
Source: Bureau of Labor Statistics.
-5%
0%
5%
10%
15%
603020 40 5010
Month
Historical average
Current recovery
14.1%
7.8%
6. Employers cut back on health and pension benefits. Te share o people wih
employer-sponsored healh insurance dropped rom 59.8 percen in 2007 o 53.9
percen in 2013, he mos recen year or which daa are available.18 Te share o
privae-secor workers who paricipaed in a reiremen plan a work ell o 40.8
percen in 2013, down rom 41.5 percen in 2007.19 Families now have less eco-
nomic securiy han hey did in he pas due o ewer employmen-based benefis,
no jus because o modes job and wage gains.
7. Some communities continue to struggle disproportionately from unemployment.
Te unemploymen rae was 5.5 percen in February 2014. Te Arican Americanunemploymen rae increased slighly o 10.4 percen, he Hispanic unemploymen
rae ell slighly o 6.6 percen, and he whie unemploymen rae also ell slighly o
4.7 percen. Meanwhile, youh unemploymen decreased o 17.1 percen. Te
unemploymen rae or people wihou a high school diploma was 8.4 percen,
compared wih 5.4 percen or hose wih a high school degree, 5.1 percen or hose
wih some college educaion, and 2.7 percen or hose wih a college degree.20
Populaion groups wih higher unemploymen raes have sruggled disproporion-
aely more amid he weak labor marke han whie workers, older workers, and
workers wih more educaion.
FIGURE 3
January 2015 unemployment rate by race
Source: Bureau of Labor Statistics, Current Population Survey (U.S. Department of Labor, 2015).
White 4.9%
6.7%
10.3%
Hispanic
African American
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5 Center for American Progress | Economic Snapshot: March 2015
8. The rich continue to pull away from most Americans. Incomes o households a he
95h percenilehose wih incomes o $196,000 in 2013, he mos recen year or
which daa are availablewere more han nine imes he incomes o households in
he 20h percenile, whose incomes were $20,900. 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 $51,939 in 2013, is lowes level in inflaion-adjused dollars since 1995.21
9. Corporate profits stay elevated near pre-crisis peaks. Inflaion-adjused corporae
profis were 102.7 percen larger in December 2014 han in June 2009. Te afer-ax
corporae profi raeprofis o oal assessood a 3 percen in December
2014.22 Corporae 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 benefis rom heir wealh hrough ax reorm is a crucial
policy prioriy.
FIGURE 4
Corporate profits stay elevated near prerecession peaks
After-tax corporate profit rate
Note: Shaded bars indicate recessions as defined by the National Bureau of Economic Research.
Source: Profit rates are calculated based on data from Board of Governors of the Federal R eserve System, “Z.1 Release—Financial Accounts of the
United States” (2014). Inflation adjustments are based on the Personal Consumption Expenditure Index from Bureau of Economic Analysis, National
Income and Product Accounts (U.S. Department of Commerce, 2000–2014).
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
2000 2002 2004 2006 2008 2010 2012 2014
3.02%
2.51%
Dec.2007
Dec2014
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6 Center for American Progress | Economic Snapshot: March 2015
10. Corporations spend much of their money to keep shareholders happy. From
December 2007when he Grea Recession saredo December 2014, nonfi-
nancial corporaions spen, on average, 97.8 percen o heir afer-ax profis on
dividend payous and share repurchases.23 In shor, almos all o nonfinancial
corporae afer-ax profis have gone o keeping shareholders happy during he
curren business cycle. Nonfinancial corporaions also held, on average, 5.4 percen
o all o heir asses in cashhe highes average share since he business cycle haended in December 1969. Nonfinancial corporaions spen, on average, 168.7
percen o heir afer-ax profis on capial expendiures or invesmensby selling
oher asses and by borrowing. 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, manuacuring plans and equipmen, and workorce developmen.
FIGURE 5
Dividend and share repurchases as a share of after-tax profits
Average share of after-tax profits
Source: Average of dividend and share repurchases as a share of after-tax profits are calculated based on data from Board of Governors of the
Federal Reserve System, “Z.1 Release—Financial Accounts of the United States” (2014). Inflation adjustments are based on the Personal
Consumption Expenditure Index from Bureau of Economic Analysis, National Income and Product Accounts (U.S. Department of Commerce,
2000–2014).
Sept.
1953
Dec.
1957
Sept.
1960
March
1970
Dec.
1973
Dec.
1990
June
2001
March
2008
Sept.
1980
20.2%33.9%29.4% 23.7% 106.2% 93.3%38.2% 96.5% 92.1%
11. Poverty is still widespread. Te povery rae was 14.5 percen in 2013, down rom
15 percen in 2012. Tis change, however, was saisically insignifican. Moreover,
he povery rae or his recovery increased a a rae o 0.2 percenage poins, com-
pared o an average decrease o 0.7 percenage poins in previous recoveries o a leas
equal lengh. Some populaion groups suffer rom much higher povery raes han
ohers. Te Arican American povery rae, or insance, was 27.2 percen, and he
Hispanic povery rae was 23.5 percen, while he whie povery rae was 9.6 percen.
Te povery rae or children under age 18 ell o 19.9 percen. More han one-hird o
Arican American children37.7 percenlived in povery in 2013, compared wih
30.4 percen o Hispanic children and 10.7 percen o whie children.24
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7 Center for American Progress | Economic Snapshot: March 2015
12. Household debt is still high. Household deb equaled 102.5 percen o afer-ax
income in December 2014, down rom a peak o 129.7 percen in December 2007.25
Bu, nonrevolving consumer crediypically insallmen credi such as suden and
car loanshas oupaced afer-ax income growh. I has grown rom 14.6 percen o
afer-ax income in June 2009 o 18.4 percen in December 2014. A reurn o deb
growh oupacing income growhwhich was he case or oal deb prior o he
sar o he Grea Recessionrom already-high deb levels could evenually sloweconomic growh again. Tis would be especially rue i ineres raes also rise rom
hisorically low levels due o a change in he Federal Reserve’s policies. Consumers
would have o pay more or heir deb, and hey would have less money available or
consumpion and saving.
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
Research Assisan for he Economic Policy eam a he Cener.
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Endnotes
1 Unemployment numbers are taken from Bureau of LaborStatistics, Current Population Survey .
2 Ibid.
3 Calculations are based on Bureau of Economic Analysis, RealGross Domestic Product, Chained Dollars (U.S. Department ofCommerce, 2015).
4 GDP growth is calculated based on data from Bureau ofEconomic Analysis.
5 Employment-growth data are calculated based on Bureauof Labor Statistics, Current Employment Statistics.
6 Council of Economic Advisers, “Achievement and Challengesin the U.S. Labor Market,” available at https://www.whitehouse.gov/sites/default/files/docs/2015_erp_chap-ter_3.pdf (last accessed March 2015).
7 Unemployment numbers are taken from Bureau of LaborStatistics, Current Population Survey .
8 Calculations are based on productivity growth (output perhour) for nonfarm businesses from Bureau of LaborStatistics, Current Employment Statistics (U.S. Department ofLabor, 2015).
9 Ibid.
10 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.Department of Commerce, 2015).
11 Ibid.
12 National Association of Realtors, “Existing-Home SalesSlightly Improve in February, Price Growth Gai ns Steam,”Press release, March 23, 2015, available at http://www.realtor.org/news-releases/2015/03/existing-home-sales-slightly-improve-in-february-price-growth-gains-steam.
13 Bureau of the Census, Housing Vacancies and Homeowner-ship (U.S. Department of Commerce, 2015).
14 Congressional Budget Office, “Updated Budget Projections:2015 to 2025” (2015), available at http://www.cbo.gov/sites/default/files/cbofiles/attachments/49973-UpdatedBudget-Projections.pdf .
15 Ibid.
16 Employment-growth data are calculated based on Bureauof Labor Statistics, Current Employment Statistics.
17 Ibid.
18 Bureau of the Census, Income, Poverty, and Health InsuranceCoverage in the United States: 2013.
19 Craig Copeland, “Employment-Based Retirement PlanParticipation: Geographic Differences and Trends, 2013”(Washington: Employee Benefit Research I nstitute, 2014),available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2515930.
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: 2013.
22 Profit rates are calculated based on data from Board of
Governors of the Federal Reserve System, “Z.1 Release--Financial Accounts of the United States” (2014). Inflationadjustments are based on the Personal ConsumptionExpenditure Index from Bureau of Economic Analysis,National Income and Product 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:2013.
25 Calculations are based on Board of Governors of the FederalReserve System, “Z.1 Release—Financial Accounts of theUnited States.”
https://www.whitehouse.gov/sites/default/files/docs/2015_erp_chapter_3.pdfhttps://www.whitehouse.gov/sites/default/files/docs/2015_erp_chapter_3.pdfhttps://www.whitehouse.gov/sites/default/files/docs/2015_erp_chapter_3.pdfhttp://www.realtor.org/news-releases/2015/03/existing-home-sales-slightly-improve-in-february-price-growth-gains-steamhttp://www.realtor.org/news-releases/2015/03/existing-home-sales-slightly-improve-in-february-price-growth-gains-steamhttp://www.realtor.org/news-releases/2015/03/existing-home-sales-slightly-improve-in-february-price-growth-gains-steamhttp://www.cbo.gov/sites/default/files/cbofiles/attachments/49973-UpdatedBudgetProjections.pdfhttp://www.cbo.gov/sites/default/files/cbofiles/attachments/49973-UpdatedBudgetProjections.pdfhttp://www.cbo.gov/sites/default/files/cbofiles/attachments/49973-UpdatedBudgetProjections.pdfhttp://www.cbo.gov/sites/default/files/cbofiles/attachments/49973-UpdatedBudgetProjections.pdfhttp://www.cbo.gov/sites/default/files/cbofiles/attachments/49973-UpdatedBudgetProjections.pdfhttp://www.cbo.gov/sites/default/files/cbofiles/attachments/49973-UpdatedBudgetProjections.pdfhttp://www.realtor.org/news-releases/2015/03/existing-home-sales-slightly-improve-in-february-price-growth-gains-steamhttp://www.realtor.org/news-releases/2015/03/existing-home-sales-slightly-improve-in-february-price-growth-gains-steamhttp://www.realtor.org/news-releases/2015/03/existing-home-sales-slightly-improve-in-february-price-growth-gains-steamhttps://www.whitehouse.gov/sites/default/files/docs/2015_erp_chapter_3.pdfhttps://www.whitehouse.gov/sites/default/files/docs/2015_erp_chapter_3.pdfhttps://www.whitehouse.gov/sites/default/files/docs/2015_erp_chapter_3.pdf