In advance of Obamas SOTU speech, heres Dean Baker with an assessment of the real state of the union. Via Al Jazeera: -Erika Since the recession’s trough in 2009, the economy has been slowly growing and making up lost ground. Due to the slow pace of growth and the upward redistribution of income over this period, most people are still considerably worse off than before the recession began. This can be seen most clearly with employment. If the same share of the population was employed today as before the downturn, the U.S. would have almost five million more jobs. The number of people employed part-time who would like full-time employment is still more than two million above pre-recession levels, even though that number has fallen sharply over the last four years. Furthermore, wages have been virtually flat throughout the recovery. After adjusting for inflation, the average hourly wage for all workers is unchanged over the last six years. None of this should surprise. The basic story is a simple one: It is difficult to recover from a recession caused by the collapse of an asset bubble. The economy has had bad recessions before. In 1974-75 the unemployment rate peaked at 9 percent. In 1981-82 it peaked at 10.8 percent. In both cases the economy bounced back quickly from the downturn. In 1980 the economy was almost 19 percent larger than it had been in 1973. In 1988 the economy was more than 28 percent larger than it had been in 1981. By contrast, in 2014 the economy was just 8.1 percent larger than in 2007. Furthermore, because of the prolonged weakness of the labor market we have seen an unprecedented shift of income from wages to profits. As a result of the shift from wages to profits, coupled with slow growth, aggregate wages are 20 percent less today than what had been projected for 2015 by the Congressional Budget Office in 2007 before the recession. It is difficult to see this story as one that merits much celebration. The rate of economic and job growth did pick up in 2014, but even with the pace we saw in 2014, it would take two full years to get back to full employment. This matters not only for the people who are unable to get jobs, but also for those who already have jobs. They are not going to be able to secure wage increases until the labor market is considerably tighter than it is currently. As a result, the gains from growth are likely to continue to go largely to profits and high-end wage earners.
Posted on: Mon, 19 Jan 2015 20:47:00 +0000