This article from the New Yorker is a little technical but has good points to make
September 16, 2013
The Uneven Economic Recovery: Eleven Things We’ve Learned and Six Charts
On a day when President Obama talked about the economy and the financial system five years after the collapse of Lehman Brothers, it’s worth being reminded about what has transpired in those years, taking into account the many revisions that have been made to the official statistics since that fateful day in September, 2008. For ease of exposition, I’ll list them individually.
1. The recession started before Wall Street went ape. According to the National Bureau of Economic Research, the contraction began in December of 2007, three months before Bear Stearns had to be rescued, and ten months before Lehman’s demise. What precipitated the recession was the burst of the real-estate bubble, not the troubles on Wall Street. (Of course, the two were connected, and what happened on Wall Street did make things a lot worse.)
2. The Great Recession was indeed great. At eighteen months—from December, 2007, to June, 2009—it was the longest period of economic contraction since the Great Depression. (That humdinger lasted forty-three months, from August, 1929, to March, 1933.) During the recession, the gross domestic product, which usually grows by about 2.5 per cent a year—driven by population growth, capital investment, and technical progress—fell by more than five per cent. That’s about twice as much as output declined during the recession of 1981-1982, which was the second-deepest recession in the postwar era.
3. The defining characteristic of the Great Recession and its aftermath was layoffs and joblessness. In most recessions since 1945, over-all employment had fallen by about two or three per cent, but between December, 2007, and February, 2010, the number of people working in the U.S. economy outside the farming sector fell from 138,142,000 to 129,320,000—a drop of almost nine million, or 6.3 per cent. The only postwar stretch that even compares was the sharp recession in 1948-49, when employment fell by about five per cent. But that downturn was relatively brief: within a year and half, employment was back to its pre-recession level.)4. The “recovery,” which began in July of 2009, is more than four years old—fifty-one months, to be precise. In historical terms, it is already getting a bit long in the tooth. Since 1945, the average period of expansion has been fifty-eight months. That doesn’t mean we are due for another recession; the economy doesn’t work like that. But it does highlight how long we’ve been stuck in a period of subpar growth. By this stage, we should be talking about a normal “expansion” rather than a recovery.
5. Relative to previous recoveries, this one has been weak pretty much however you look at it. Output, employment, corporate investment, and wages all have grown more slowly than they usually do in an economy rebounding from a recession, especially a deep one. Basically, we’ve been stuck with G.D.P. growth of two to two and a half per cent, which is enough to generate modest employment growth but not to raise the percentage of the population that is working, which is the best measure of over-all conditions in the labor market. Since the fall of 2009, the employment-to-population ratio has been stuck at around 58.5 per cent, which is four to five percentage points below its pre-recession level.
6. As I’ve pointed out many times before, a decline in the labor participation rate has exaggerated the fall in the unemployment rate. To be classified as unemployed by the Labor Department, a person has to be actively looking for work. The jobless who get discouraged and stop applying for employment aren’t counted. The labor force participation rate fell to 63.2 per cent last month; it was sixty-six per cent in December, 2007.
7. As a consequence of modest job growth, over-all employment is still well below where it was when the Great Recession began. If job growth continues at recent rates—about a hundred and seventy-five thousand a month—it will take another year or so to create the two million jobs needed to close the gap. Recent history has no precedent of employment needing six years to recover from an economic downturn: the closest example is the “jobless recovery” after the relatively mild recession of 2001, when it took almost four years for total nonfarm employment to rebound to its prior level.
8. In addition to being unusually modest, the recovery has been unusually unbalanced—especially in how its gains have been distributed. Corporations have seen their profits surge, thanks to efforts at shedding jobs and keeping down wages, as well as access to cheap financing. At the start of the recession, over-all corporate profits after tax measured about $1.2 trillion a year. Since then, they have jumped to $1.8 trillion, a rise of about fifty per cent.9. Most Americans haven’t seen their wages and incomes rise by anything like fifty per cent. In fact, median household income—the income of the family in the middle of the income distribution—is still well below its pre-recession level. According to a study by two former Census Bureau officials, in December, 2007, the median household income was $55,500. In June of this year, after adjusting for inflation, it was $52,100—a decline of about six per cent.
10. Apart from corporations, the other big winners during the recovery have been people with considerable holdings in the stock market. In March, 2009, a few months before the recovery began, the Dow fell below 6,630. Today, it stands above 15,300, a rise of about a hundred and thirty per cent. That translates into a gain in over-all household wealth of about seven trillion dollars. Since the richest ten per cent of American households own about ninety per cent of stocks, most of this vast sum has ended up in the accounts of the already wealthy.
11. Taking all these things together, the Great Recession and its aftermath have accentuated the long-term trend of rising inequality. After the rich saw their incomes take a hit in 2007 and 2008, when the stock market fell, their share of over-all income has rebounded to pre-recession levels. In 2012, the top ten per cent of earners received about fifty per cent of all the income that the economy generated, and the top one per cent received 22.5 per cent, according to an updated study by the economists Emmanuel Saez and Thomas Piketty.Photograph by Andrew Harrer/Bloomberg/Getty. Charts by the Federal Reserve Bank of Minneapolis, the Federal Reserve Bank of St. Louis, and The New Yorker.
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