Economy Not Feeling the Recovery
This is the slowest recovery in decades, says an analysis of several economic indicators by the Center for American Progress in Washington, DC.
(Associated Press file photo)
CLEVELAND, Ohio -- This has been the slowest recovery in more than 50 years, according to a recent analysis based on several economic indicators.
"This has been a poor recovery in every regard," said Christian E. Weller, a senior fellow at the Center for American Progress, a progressive think tank in Washington, D.C. "We're not in a recession, but we are not doing particularly well."
The recovery has been so slow that many incorrectly believe the country is still in a recession. They often say: "Recovery. What recovery?"
But the country has been in recovery since June 2009. Employment figures offer a glimpse at this. During that year, there were months in which the country hemorrhaged hundreds of thousands of jobs. For example, in January 2009, employment was down by about 600,000. Contrast that with last Friday's jobs report in which employment was up by 214,000.
Weller, also a professor of public policy at the University of Massachusetts Boston, said the economy has been creeping -- instead of humming -- along. He and Jackie Odum, a research assistant for American Progress' economic policy team, analyzed a long list of economic indicators, based on government data, from the start of the recovery in June 2009 to its fifth anniversary in June 2014. They then compared that data to that of previous recoveries of at least equal length. Those recoveries began in: March 1961, March 1975, December 1982, March 1991 and December 2001.
The current recovery showed 11.4 percent GDP growth -- or Gross Domestic Product, which measures the size of the economy -- through the second quarter of 2014. This was the slowest such growth, in inflation-adjusted dollars, of any of the recoveries mentioned. The fastest growth came during the recovery in the early 1960s, when the economy grew by 35.4 percent. In next to last place was the recovery beginning in late 2001, in which the economy expanded by 15.8 percent.
Here are some other findings that point to the economy bouncing back too slowly:
Median household income remains far below pre-recession levels -- Median inflation-adjusted household income, at $51,939 in 2013, is at its lowest level since 1995 in inflation-adjusted dollars. In 2007, it was $56,436.
Job growth slower than in other recoveries -- The total number of jobs has grown by 6.5 percent during this recovery, contrasted with 12.9 percent in previous comparable recoveries.
Poverty rate increased -- During the previous recoveries mentioned, the poverty rate went down. During this one, it increased. The poverty rate increased by 0.2 percentage points during this recovered, but decreased by 0.7 percentage points in previous comparable recessions.
Productivity growth below other recoveries -- Weller said increased productivity is key to increasing living standards because it shows workers are getting better at doing more in the same amount of time. Historically, high productivity growth made the United States the wealthiest country on earth. During this recession, productivity rose 6.5 percent. In the previous recoveries mentioned, it rose an average of 13.4 percent.
Many of the indicators, especially those based on income and employment, support anecdotal evidence that too many Americans have been losing ground in recent years. Many of these indicators are also consistent with analyses by economists and researchers in recent years showing that this post-recession economy is creating a disproportionate number of low-wage jobs.
"The economy and jobs are issues number 1 and 2 in the polls," Weller said. "That shouldn't happen heading into the sixth year of an economic recovery.
"At this point in the economic cycle, people should be worried about Social Security," he said. "They should be worried about taxes," he said. "We should be having discussions about immigration and conversations about race and other socio-political issues that have been put to the side."
The comparatively poor showing of this recovery is puzzling, Weller said. What it doesn't have in common with the other recoveries mentioned is that this recovery followed the Great Recession, this country's hardest economic hit since the Great Depression.
Ironically, that is why this recovery should have outpaced the others, he said.
"The recession that came before this recovery was so severe," Weller said. "If the economy fell so hard, it should have risen very quickly," Weller said. "Exactly the opposite happened. We had a very sharp drop in the economy, and now we have such a long recovery that is leaving us frustrated and economically insecure."
Why is this recovery so weak?
There may be factors pointing to why this recovery has proven so weak.
Disturbing to Weller, is that while many Americans are struggling, many corporations are doing well. When adjusted for inflation, corporate profits were 94 percent larger in June 2014 than they were in June 2009, he said. Despite this, Weller said corporations have been reluctant to raise workers' wages or create more jobs.
"What that means is that companies are not putting money back into the economy," he said. "They are not hiring. They are barely keeping pace with population growth. They are not investing as much as they had in the past."
Weller said in the past, companies invested more even though profits were not as robust. He said cutting employee compensation has often been the first resort for companies seeking to increase profits. This ranges from cuts in salaries and benefits to eliminating jobs.
Though job growth has been steady most of this year, some experts are becoming concerned about increasing job cuts. Challenger, Gray & Christmas, Inc., a global outplacement company in Chicago that also does labor market analysis, expressed concern about the 51,183 job cuts last month.
"October's total is not only the second highest of the year, behind May's 52,961; but it marks only the fourth time in the last 22 months that job cuts exceeded 50,000," said the company's news release.
When people can't find work, can only find low-wage jobs or don't get adequate raises, such circumstances become more than just personal stories of struggle, Weller said.
"So, what you are ending up with is a vicious cycle where you are not growing the economy because people don't have enough money to buy all the goods," he said.
More government spending could spur economic growth by increasing the demand for goods and services, Weller said. Since publicly funded projects usually require that workers be paid at least a livable wage, most of them would have enough disposable income capable of stimulating the economy.
That is why Weller is concerned that federal government spending impacting consumption and investment fell by 0.9 percent in the second quarter of 2014.
Greg Lawson, a policy analyst at The Buckeye Institute for Public Policy Solutions, a conservative think tank in Columbus, isn't in favor of increased government spending.
"We don't agree with this concept of the stimulative effect of government spending," Lawson said. "If you look at what happened after the stimulus was no longer in place, we actually saw job growth. It wasn't at the rate we wanted to see, but we weren't hemorrhaging jobs like we were in the Great Recession."
He said the slow recovery "is a matter of bad policies coming out of Washington." Lawson considers the Affordable Care Act, also known as Obamacare, among them. He said small businesses have traditionally led the way in creating jobs, but the ACA leaves them little incentive to do so. Those with at least 50 employees will have to either offer the amount of health insurance required by the law or face penalties.
"I think that the taxes and the penalties that are being threatened to be imposed on businesses are making businesses reticent to hire people, and that is creating a drag on the economy," Lawson said. "You have got to think long and hard before you hire that 50th person."
Lawson believes, what he characterizes as over-regulation, is also fostering a slow economy. He gave the example of a recent Environmental Protection Agency plan designed to reduce carbon emissions. Many conservatives are concerned that coal-fired plants are at risk of being shuttered because doing so would offer a quick way to reduce carbon emissions. However, Lawson said many businesses, especially those in manufacturing, are dependent on such plants to provide affordable energy.
"Manufacturers here fear what it is going to happen with the cost of energy once coal plants are idled," he said.
He said these unknown future costs have left many such businesses reluctant to hire.
Some groups struggling more than others
Weller said some demographic groups continue to disproportionately struggle from unemployment. Among them are African Americans, Hispanics and young people. For example, in October the overall unemployment rate was 5.8 percent. For whites, it was 4.8 percent. Hispanics had a 6.8 percent unemployment rate. For African Americans, it was 10.9 percent and 18.6 percent for teenagers.
Sheila Wright, executive director of the Cleveland NAACP, noted that the unemployment rate for African Americans has been about double that of the overall rate for decades. At the height of joblessness in the early part of the recovery, unemployment rates for African Americans sometime rivaled those during the Great Depression. What remains to be seen is if such high rates of unemployment will have a lasting impact.
With so many in these demographic groups still out-of-work, Wright said they are going to have to lobby for jobs in an attempt to eliminate the disparities.
"If blacks and Hispanics are going to wait for this system to self-correct to provide more opportunity, they are going to continue to wait," she said.
Wright said renewed efforts have to be made to push for companies to make a commitment to diversity in hiring and awarding contracts. She said having more African Americans and other minorities in key decision-making roles would help with such efforts. Wright said companies in various sectors throughout Northeast Ohio should make a commitment to spending with minority-owned businesses.
"It is a layered issue, but there has to be more of a commitment to economic justice," she said. Justice is not charity. Justice is about access."
Increased access to more markets for more black and minority-owned businesses would spur job growth by creating more of these businesses and strengthening existing ones, Wright said.
"Black people are going to have to create more job opportunities for other blacks," she said. "That doesn't mean that they will only hire black people. But if these businesses could create opportunity, it would follow that more people would be hired."