Transcript Slide 1

May 5th, 2012
ECONOMIC UPDATE: WHERE ARE WE,
AND WHAT’S NEXT?
2012 National Conference of the National
Association of Planning Councils
Heidi Shierholz
Economist, Economic Policy Institute
WHERE WE ARE NOW
Still need nearly 10 million jobs to get
back to full employment
Great Recession was worst recession in 70 years
But this is not the worst recovery
Though we have seen unprecedented
public sector losses
Unemployment has improved but its
still very high
And much of the improvement in the unemp rate
has been from people dropping out
Unemployment duration hasn’t improved much
“Skilled workmen in demand
despite vast unemployment”
That’s a headline from the Washington Post, March 13...
1935
“Technological progress has been so rapid during the
depression that welders and other experts, idle since 1929, are
outmoded…Unemployment may run into the millions, but as
the iron, steel, and metal-working industries improve, a
scarcity of skilled workmen is developing.”
Popular discourse today too suggests persistent high
unemployment is due to workers not having the right
skills. In reality, it is due to there not being enough work.
Unemployment up for all groups of workers
High unemployment => low wage growth
(Year-over-year growth in nominal average hourly earnings)
High unemployment => falling incomes
High unemployment => rising poverty
On top of four years of deep cuts,
states still face large shortfalls
WHERE WE ARE HEADED
Unemployment projections
Unemployment projections by race
(2012 circled)
Unemployment Projections by state
(For the states where you are from!)
US AZ CA
FL
IL
NY OH OK
TX
VA WI
2012 8.1 8.6 10.3 9.3 9.3 7.4 8.0 5.3 7.4 6.1 6.7
2013 7.7 8.3 9.4 8.5 8.4 7.0 7.7 5.3 7.1 6.1 6.1
2014 6.7 6.9 7.9 7.3 6.8 6.3 6.6 5.3 6.4 5.5 4.8
2015 5.9 5.7 6.2 6.4 5.4 5.2 5.6 4.7 5.3 4.8 3.7
Source: Authors’ analysis of Moody’s Economy.com projections.
WHAT SHOULD BE DONE
At the National Level:
Gov’t has two main tools to boost economy:
1. Monetary policy (alas can’t do much when interest rates
are basically zero)
2. Fiscal policy (aka “stimulus”)
• Priority #1: Fiscal relief to states!
• Investment in infrastructure
• Maintain safety net expansion
• Direct jobs creation in communities hit particularly hard
Note: Even large temporary increases in spending won’t change
long-run fiscal outlook, but would put millions back to work. [Our
long-run debt problems are about rising health care costs, period.]
At the state/local level:
Unlike the federal government, state/local governments generally
can’t run deficits.
So must tax/spend wisely while keeping budget balanced
(wisely = minimizing negative effect on economy of budget gaps).
To balance the budget when there are gaps, must either increase
revenue (i.e. taxes) or decrease spending. Both of these can slow
economic growth.
Rule of thumb: Because in a period of high unemployment
cutting spending generally does more economic damage than
raising taxes, it’s preferably economically to maintain spending
and raise taxes.
For more information
Economic Policy Institute
www.epi.org
1333 H Street, NW
Suite 300, East Tower
Washington, DC 20005-4707
202.775.8810