Late last week the United States government issued two of the most important pieces of information that gives us a sense of how the economy is doing–the Gross Domestic Product (GDP) and the unemployment rate. The top-line results were strong. But below the surface these two indicators suggest that the economy is still moving sideways overall and remains downright dysfunctional for people of color and the working poor. Despite the fact that job growth was in the hundreds of thousands last month, black unemployment remains stuck in the double digits and Latino unemployment 50 percent higher than that for whites. And even though the overall economy grew in the spring at an explosive rate, for the year its on track to be half of that spring growth rate. Analysts have actually downgraded their economic expectations for the rest of the year.
Yet these important caveats were absent from President Obama’s press briefing last Friday. Going all out on the news, Obama declared that “companies are investing, consumers are spending and American manufacturing, energy, technology, autos all are booming.”
But this disconnect between what the headline numbers flowing out of the nation’s capital and what’s actually occurring in people’s lives brings to us to a potentially unsettling place: Perhaps the standard ways we use to gauge the health of the economy may no longer be relevant.
In normal economic times, last week’s GDP and unemployment results would signal that the economy is back. Indeed, based on the initial numbers the good times should be rolling. But they’re not. The truth is that we are not in, nor have we been for the last six years, anywhere near normal economic times. In fact we appear to have arrived at the point where good economic news is subsumed by the reality of the economic calamity that began in 2008.
There’s a reason why even though even though you might be hearing things are getting better, you may not actually feel it.
For the three-month period beginning in April of this year and ending in June the GDP, which is the total dollar value of all goods and services produced in the United States, grew 4.5 percent. Whenever you hear that the economy has grown or shrank what people are actually saying is that GDP has moved up or down.
With a 4.5 percent surge last quarter, the economy is close to what economists consider to be an economic boom. At nearly 5 percent, jobs should be plentiful with incomes rising. But they are not. Job growth is near the average of where it’s been for the last 53 months and hourly wages last month rose by just a penny.
The number of jobs generated in July tell a similar contradictory story. Before the crash the 200,000 jobs produced last month would be a sign of a strong economy. That number is in line with the Clinton Administration average While President Clinton was in office the nation saw the largest number of jobs created and had the country’s longest economic boom since World War II. But the 200,000 job banner doesn’t tell the whole story.
The fact is that, as the National Employment Law Center(PDF) points out, most jobs created during the current recovery have been low-wage jobs. Last month nearly 8 million people were working in part-time jobs when they wanted to be in full-time ones. Moreover, the number of long-term unemployed–people out of work for six months or more– was stuck at more than 3 million. And another 8 million people continued to be absent from the labor force all together because of the difficulty finding work.
The harsh truth is that even with 200,000 jobs a month being created it’s hard to move the needle because the jobs hole is so wide. As employment guru Heidi Shierholz of the Economic Policy Institute told NPR, at 200,000 jobs a month “it would take nearly four more years to get back to pre-recession” job levels.
The bottom line is that only the numbers below the headlines tell the real story. But why is the disconnect between what’s being communicated and what’s actually happening so wide? There are three likely reasons.
The first problem is that economic information is constant and concentrated on small chunks of time. The jobs report comes out each month. GDP numbers come out every three months. Like information about the weather these can vary greatly. Just as it can be 80 degrees one day and 60 the next, the month-to-month jobs numbers can swing widely. That’s why the only way to determine what’s happening is to look at things over time. Unfortunately, neither the federal government nor the mainstream press do a good job of showing the bigger picture.
Another issue is that the scale of the 2008 crisis was enormous. At one point we were loosing nearly 1 million jobs a month, and it wiped out wealth in communities of color that are unlikely to come back for at least a generation. There were actions that we could have been taken to turn this situation around but we didn’t. The hole was big and we’re climbing out slowly. That’s why the economic good news needs to be twice as good before most people would feel it.
The last point is that 90 percent of the recent economic gains, as Nobel Prize winner Joseph Stiglitz points out, have flowed to the top 1 percent. This means that benefits of growth no longer flow to the overwhelming majority of people. Relative to those at the top, Americans are sliding backwards. Even if the economy took off Our economy has a long way to go before returning to a place where it works for everyone. But we can’t get there until we honestly and clearly acknowledge the challenges that remain. Given the fact that the economy remains voters’ No. 1 priority, it seems as if average citizens understand where we are even if our leaders struggle to acknowledge it.