Economic Snapshot: October 2014

8102019 Economic Snapshot October 2014

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1 Center for American Progress | Economic Snapshot October 2014

Economic Snapshot October 2014

Christian E Weller on the State of the US Economy

By Christian E Weller and Jackie Odum October 27 2014

Tis monhrsquos economic daa show us ha he economy is in much beter shape han a

any oher poin since he Grea Recession ended in June 2009 bu ha isnrsquo saying much

Te Unied Saes economy has reached a posrecession record low o 59 percen in

unemploymen gross domesic produc or GDP increased a an inflaion-adjused

annual rae o 46 percen in he second quarer employmen prospecs have improvedsignificanly or vulnerable populaions and he uninsured rae is a an all-ime posre-

cession low1 However despie hese posrecession landmarks we are sill ar rom an

economy ha works or mos people largely because he economy and he labor marke

have been moving a a comparaively slow pace in his recovery

Inflaion-adjused median household income991252hal o all households had less han ha

and he oher hal more han ha991252was $51939 in 2013 Tis was more han $2000

below he 2009 level and more han $4000 below he median income in 2007 he las

ull year beore he Grea Recession Te povery rae remains slighly higher han i was

in 2009 a 145 percen Bu as he naionrsquos lower- and middle-income amilies sruggleo regain he economic securiy hey once had corporae profis are skyrockeing and

he share o income or he naionrsquos wealhies people coninues o grow rom already

absurdly high levels

Presiden Barack Obama has aken imporan seps oward creaing a posrecession

economy ha works or everyone991252rom his hisoric push or financial reorm and

universal healhcare o a series o execuive orders on equal pay and responsible conracing

Policymakers need o coninue he presidenrsquos effor by implemening common-sense

policies ha boos economic growh and help lower- and middle-class Americans gain

real economic securiy and find meaningul economic opporuniies Such policy

inervenions can sar wih raising he minimum wage exending unemploymen

insurance srenghening workplace policies such as paid amily leave and creaing

effecive savings incenives I is ime or Congress o play is par in building a beter

economy rom he middle ou raher han rom he op down




1 Economic growth in this recovery lags behind that of previous business cycles

GDP increased in he second quarer o 2014 a an inflaion-adjused annual rae o

46 percen afer conracing 21 percen in he previous quarer Domesic con-

sumpion increased by an annual rae o 25 percen and housing spending rose

subsanially by 88 percen while business invesmen growh also increased a a rae

o 97 percen Expors increased 111 percen in he firs quarer which was offse by

even aser impor growh o 113 percen Governmen spending ell 09 percenTe economy expanded 103 percen rom June 2009 o June 2014991252is slowes

expansion during recoveries o a leas equal lengh

2 Improvements to US competitiveness fall behind previous business cycles

Produciviy growh 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 hus means ha

new economic resources available o improve living sandards are growing more

slowly han would be he case wih aser produciviy growh US produciviy rose

65 percen rom June 2009 o June 2014 he firs 20 quarers o he economic

recovery since he end o he Grea Recession2 Tis compares o an average o 134

percen during all previous recoveries o a leas equal lengh3 No previous recovery

had lower produciviy growh han he curren one

FIGURE 1

GDP growth in recovery in comparison to previous recoveries

90

120

125

130

115

110

105

100

95

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 201918

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

Source Authorsrsquocalculations based on Bureau of Economic Analysis National Income and Product Accounts (US Department of Commerce 2014)

Calculations only done for recoveries that have lasted at l east four years

Recovery after the Great Recession




3 The housing market recovery still struggles to gain momentum New-home sales

amouned o an annual rae o 467000 in Sepember 2014991252a 17 percen increase

rom he 399000 homes sold in Sepember 2013 bu well below he hisorical average

o 698000 homes sold beore he Grea Recession4 Te median new-home price in

Sepember 2014 was $209700 up rom one year earlier5 Exising-home sales increased

by 24 percen in Sepember 2014 rom one year earlier bu he median price or

exising homes was up by 56 percen during he same period6 Home sales have ogo a lo urher given ha homeownership in he Unied Saes sood a 648 percen

in he firs quarer o 2014 down rom 682 percen beore he 2007 recession Te

curren homeownership raes are similar o hose recorded in 1996 well beore he

mos recen housing bubble sared7

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 Moderate labor-market recovery shows less job growth than in previous business

cycles Tere were 85 million more jobs in Sepember 2014 han in June 2009 Te

privae secor added 92 million jobs during his period Te loss o some 562000sae 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 ohers8 Te oal number

o jobs has now grown by 65 percen during his recovery compared o an average

o 129 percen during all prior recoveries o a leas equal lengh9

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 unaffeced

by he aging o he overall populaion991252was 767 percen in Sepember 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 33 percenage poins a his sage

during previous recoveries o a leas equal lengh10

6 Employers cut back on health and pension benefits Te share o people wih

employer-sponsored healh insurance dropped rom 598 percen in 2007 o 539

percen in 2013 he mos recen year or which daa are available11 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 200712 Families 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




7 Some communities continue to struggle disproportionately from unemployment

Te unemploymen rae ell o 59 percen in Augus 2014 Te Arican American

unemploymen rae ell o 11 percen he Hispanic unemploymen rae moved

down o 69 percen and he whie unemploymen rae ell slighly o 53 percen

Meanwhile youh unemploymen increased o 20 percen Te unemploymen rae

or people wihou a high school diploma ell o 84 percen compared wih 53

percen or hose wih a high school degree 54 percen or hose wih some collegeeducaion and 29 percen or hose wih a college degree13 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 a

he 95h percenile991252hose wih incomes o $196000 in 2013 he mos recen year

or which daa are available991252were more han nine imes he incomes o households

in he 20h percenile whose incomes were $20900 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 incomesood a $51939 in 2013 is lowes level in inflaion-adjused dollars since 199514

FIGURE 2

Median household income remains far below pre-recession levels

Median household income 2013 dollars

$40000

$50000

$60000

$45000

$55000

2000 2 001 2002 2 003 2004 2 005 2006 2 007 2008 20102009 2011 2012 2013

Note Shaded bars indicate recessions as defined by the National Bureau of Economic Research

Source US Bureau of the Census Table H-6 Regions by Median and Mean Income available at httpwwwcensusgovhheswwwincome-datahistoricalhousehold (last accessed September 2014)

$51939

$56436




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

profis were 94 percen larger in June 2014 han in June 2009 Te afer-ax corporae

profi rae991252profis o oal asses991252sood a 32 percen in March 201415 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

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

December 2007991252when he Grea Recession sared991252o June 2014 nonfinancial

corporaions spen on average 996 percen o heir afer-ax profis on dividend

payous and share repurchases16 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 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 1666 percen o heir afer-ax profis

on capial expendiures or invesmens991252by selling oher asses and by borrowing

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 highlighing he need or regulaory reorm ha

incenivizes corporaions o inves in research and developmen manuacuring

plans and equipmen and workorce developmen

FIGURE 3

Corporate profits stay elevated near pre-recession peaks

After-tax corporate profit rate


Source Profit rates are calculated based on data from Board of Governors of the Federal Reserve System ldquoZ1 Release--Financial Accounts of theUnited Statesrdquo (2014) Inflation adjustments are based on the Personal Consumption Expenditure Index from Bureau of Economic Analysis National

Income and Product Accounts

05

10

15

20

25

30

35318

D e c - 2 0 0

0

D e c - 2 0 0

1

D e c - 2 0 0

2

D e c - 2 0 0

3

D e c - 2 0 0

4

D e c - 2 0 0

5

D e c - 2 0 0

6

D e c - 2 0 0

7

D e c - 2 0 0

8

D e c - 2 0 0

9

D e c - 2 0 1

0

D e c - 2 0 1

1

D e c - 2 0 1

2

D e c - 2 0 1

3

J u n - 2 0

1 4

251




11 Poverty is still widespread Te povery rae was 145 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 02 percenage poins compared

o an average decrease o 07 percenage poins in previous recoveries o a leas equal

lengh Some populaion groups suffer rom much higher povery rae han ohers

Te Arican American povery rae or insance was 272 percen and he Hispanic

povery rae was 235 percen while he whie povery rae was 96 percen Tepovery rae or children under age 18 ell o 199 percen More han one-hird o

Arican American children991252377 percen991252lived in povery in 2013 compared wih

304 percen o Hispanic children and 107 percen o whie children17

12 Household debt is still high Household deb equaled 1024 percen o afer-ax

income in June 2014 down rom a peak o 1297 percen in December 200718 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 especially rue i ineres raes also rise rom

hisorically low levels due o a change in he Federal Reserversquos 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




Endnotes

1 Jenna Levy ldquoIn US Uninsured Rate Holds at 134rdquo GallupOctober 8 2014 available at httpwwwgallupcompoll178100uninsured-rate-holdsaspx

2 Calculations are based on productivity growth (output perhour) for nonfarm businesses from Bureau of LaborStatistics Current Employment Statistics (US Department ofLabor 2014)

3 Ibid

4 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 (USDepartment of Commerce 2014)

5 Ibid

6 National Association of Realtors ldquoExisting-Home SalesSlightly Lose Momentum in August as Investor ActivityDeclinesrdquo Press release September 22 2014

7 Bureau of the Census Housing Vacancies and Homeowner-ship (US Department of Commerce 2014)

8 Employment-growth data are calculated based on Bureau

of Labor Statistics Current Employment Statistics

9 Ibid

10 Calculations based on Bureau of Labor Statistics CurrentPopulation Survey (US Department of Labor 2014)

11 Bureau of the Census Income Poverty and Health InsuranceCoverage in the United States 2013

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

13 Unemployment numbers are taken from Bureau of Labor

Statistics Current Population Survey


15 Profit rates are calculated based on data from Board ofGovernors of the Federal Reserve System ldquoZ1 Release--Financial Accounts of the United Statesrdquo (2014) Inflationadjustments are based on the Personal ConsumptionExpenditure Index from Bureau of Economic AnalysisNational Income and Product Accounts

16 Calculations are based on Board of Governors of the FederalReserve System ldquoZ1 Release--Financial Accounts of theUnited Statesrdquo

17 Calculations are based on Bureau of the Census IncomePoverty and Health Insurance Coverage in the United States2013

18 Calculations are based on Board of Governors of the FederalReserve System ldquoZ1 ReleasemdashFinancial Accounts of theUnited Statesrdquo




1 Economic growth in this recovery lags behind that of previous business cycles

GDP increased in he second quarer o 2014 a an inflaion-adjused annual rae o

46 percen afer conracing 21 percen in he previous quarer Domesic con-

sumpion increased by an annual rae o 25 percen and housing spending rose

subsanially by 88 percen while business invesmen growh also increased a a rae

o 97 percen Expors increased 111 percen in he firs quarer which was offse by

even aser impor growh o 113 percen Governmen spending ell 09 percenTe economy expanded 103 percen rom June 2009 o June 2014991252is slowes

expansion during recoveries o a leas equal lengh

2 Improvements to US competitiveness fall behind previous business cycles

Produciviy growh 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 hus means ha

new economic resources available o improve living sandards are growing more

slowly han would be he case wih aser produciviy growh US produciviy rose

65 percen rom June 2009 o June 2014 he firs 20 quarers o he economic

recovery since he end o he Grea Recession2 Tis compares o an average o 134

percen during all previous recoveries o a leas equal lengh3 No previous recovery

had lower produciviy growh han he curren one

FIGURE 1

GDP growth in recovery in comparison to previous recoveries

90

120

125

130

115

110

105

100

95

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 201918

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

Source Authorsrsquocalculations based on Bureau of Economic Analysis National Income and Product Accounts (US Department of Commerce 2014)

Calculations only done for recoveries that have lasted at l east four years

Recovery after the Great Recession























































FIGURE 2



$40000

$50000

$60000

$45000

$55000

2000 2 001 2002 2 003 2004 2 005 2006 2 007 2008 20102009 2011 2012 2013



$51939

$56436
























FIGURE 3






05

10

15

20

25

30

35318

D e c - 2 0 0

0

D e c - 2 0 0

1

D e c - 2 0 0

2

D e c - 2 0 0

3

D e c - 2 0 0

4

D e c - 2 0 0

5

D e c - 2 0 0

6

D e c - 2 0 0

7

D e c - 2 0 0

8

D e c - 2 0 0

9

D e c - 2 0 1

0

D e c - 2 0 1

1

D e c - 2 0 1

2

D e c - 2 0 1

3

J u n - 2 0

1 4

251



























Endnotes



3 Ibid


5 Ibid





9 Ibid

































































FIGURE 2



$40000

$50000

$60000

$45000

$55000

2000 2 001 2002 2 003 2004 2 005 2006 2 007 2008 20102009 2011 2012 2013



$51939

$56436
























FIGURE 3






05

10

15

20

25

30

35318

D e c - 2 0 0

0

D e c - 2 0 0

1

D e c - 2 0 0

2

D e c - 2 0 0

3

D e c - 2 0 0

4

D e c - 2 0 0

5

D e c - 2 0 0

6

D e c - 2 0 0

7

D e c - 2 0 0

8

D e c - 2 0 0

9

D e c - 2 0 1

0

D e c - 2 0 1

1

D e c - 2 0 1

2

D e c - 2 0 1

3

J u n - 2 0

1 4

251



























Endnotes



3 Ibid


5 Ibid





9 Ibid





























FIGURE 2



$40000

$50000

$60000

$45000

$55000

2000 2 001 2002 2 003 2004 2 005 2006 2 007 2008 20102009 2011 2012 2013



$51939

$56436
























FIGURE 3






05

10

15

20

25

30

35318

D e c - 2 0 0

0

D e c - 2 0 0

1

D e c - 2 0 0

2

D e c - 2 0 0

3

D e c - 2 0 0

4

D e c - 2 0 0

5

D e c - 2 0 0

6

D e c - 2 0 0

7

D e c - 2 0 0

8

D e c - 2 0 0

9

D e c - 2 0 1

0

D e c - 2 0 1

1

D e c - 2 0 1

2

D e c - 2 0 1

3

J u n - 2 0

1 4

251



























Endnotes



3 Ibid


5 Ibid





9 Ibid


































FIGURE 3






05

10

15

20

25

30

35318

D e c - 2 0 0

0

D e c - 2 0 0

1

D e c - 2 0 0

2

D e c - 2 0 0

3

D e c - 2 0 0

4

D e c - 2 0 0

5

D e c - 2 0 0

6

D e c - 2 0 0

7

D e c - 2 0 0

8

D e c - 2 0 0

9

D e c - 2 0 1

0

D e c - 2 0 1

1

D e c - 2 0 1

2

D e c - 2 0 1

3

J u n - 2 0

1 4

251



























Endnotes



3 Ibid


5 Ibid





9 Ibid





































Endnotes



3 Ibid


5 Ibid





9 Ibid














Endnotes



3 Ibid


5 Ibid





9 Ibid











Documents

Economic Snapshot: October 2014