Download The Economic Challenges Facing the Next President, or Be Careful

What do we know, what have we
learned? Michigan, US, and
Obamanomics
Jared Bernstein
Economic Policy Institute
MLHS Annual Meeting
[email protected]
Real Economy, macro
• It’s official—recession, that is…but you knew
that.
• Consumer: retrenching, big time.
• Investment: squeezed on credit and profit
sides
• Exports/Imports: Maybe, maybe not…
• Government: most reliable source of short
term growth?
Source: Bureau of Labor Statistics, EPI Employment Projections
Nov-08
Oct-08
100
Sep-08
Aug-08
Jul-08
Jun-08
May-08
Apr-08
Mar-08
Feb-08
Jan-08
Dec-07
Nov-07
Oct-07
Sep-07
Aug-07
Jul-07
Jun-07
May-07
Apr-07
Mar-07
Feb-07
Jan-07
Monthly change in employment (thousands)
Total and Private Payroll Employment, Jan. 07 - Nov. 08
200
Total
Private
0
-100
-200
-300
-400
-500
-600
Employment Declines Across Sectors
Source: Bureau of Labor Statistics
Unemployment and Underemployment, Jan. 07 - Nov. 08
Nov. 08: 12.5%
Unemployment
12%
Underemployment
10%
8%
Oct. 08: 6.7%
Feb. 08: 8.9%
6%
4%
Source: Bureau of Labor Statistics
Nov-08
Oct-08
Sep-08
Aug-08
Jul-08
Jun-08
May-08
Apr-08
Mar-08
Feb-08
Jan-08
Dec-07
Oct-07
Sep-07
Aug-07
Jul-07
Jun-07
May-07
Apr-07
Mar-07
Feb-07
Jan-07
0%
Nov-07
Feb. 08: 4.8%
2%
Job Growth
United States
6%
4%
Michigan
4.2%
2%
0%
-0.9%
-1.7%
-2%
-4%
-6%
-8%
-8.3%
-10%
March 01-Dec 07
Dec07-Oct08
Unemployment rates,
January '00 - October '08
10%
8%
9.3%
Michigan
6%
4%
2%
0%
United States
Real Median Income, Working-Age Households,
1989-2007
$60,000
Median Income, 2007 Dollars
2000: $58,555
$58,000
$56,000
2007: $56,545
$54,000
$52,000
1993: $50,806
$50,000
1989
1990
1991
1992
1993
Source: Bureau of Labor Statistics
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Median household income , 1974-2007
U.S. ($50,233)
Median income (2007 dollars)
$60,000
Michigan ($49,370)
$40,000
United States
$20,000
Michigan
Yearly Changes in Average Weekly and Hourly Earnings,
Jan. 07 - Oct. 08
3%
Average Hourly Earnings
Real change from previous year
Average Weekly Earnings
2%
1%
0%
-1%
-2%
Source: Bureau of Labor Statistics
Oct-08
Sep-08
Aug-08
Jul-08
Jun-08
May-08
Apr-08
Mar-08
Feb-08
Jan-08
Dec-07
Nov-07
Oct-07
Sep-07
Aug-07
Jul-07
Jun-07
May-07
Apr-07
Mar-07
Feb-07
Jan-07
-3%
Job Seekers Per Opening, Jan. 07 - Oct. 08
3.5
October 2008:
3.3 job seekers per opening
Job Seekers Per Opening
3.0
2.5
January 2007:
1.6 job seekers per opening
2.0
1.5
Source: Bureau of Labor Statistics
Oct-08
Sep-08
Aug-08
Jul-08
Jun-08
May-08
Apr-08
Mar-08
Feb-08
Jan-08
Dec-07
Nov-07
Oct-07
Sep-07
Aug-07
Jul-07
Jun-07
May-07
Apr-07
Mar-07
Feb-07
Jan-07
1.0
Change in Average Real Family Income Following Peak Years,
by Selected Income Quintiles
102
100
2000 Middle fifth
98
Peak year = 100
-3%
1989 Middle fifth
96
-5%
94
2000 Lowest fifth
92
-8%
1989 Lowest fifth
90
-10%
88
Peak year
1
2
Years following peak year
Source: EPI analysis of Census Bureau data
3
4
Average Income of Bottom and Middle Fifths, 2000-2009 (Forecast)
$17,500
$62,000
$61,000
$16,500
$60,000
$16,000
$15,500
$59,000
$15,000
$58,000
$14,500
Bottom Fifth
2007 - 2009:
Middle Fifth: $3,355 lost (-5.5%)
Bottom Fifth: $1,128 lost (-7.0%)
Bottom Fifth (Forecast)
$14,000
Middle Fifth
Middle Fifth (Forecast)
$13,500
$57,000
$56,000
2000
2001
2002
2003
2004
2005
Source: EPI Analysis of BLS data and Goldman-Sachs unemployment rate forecasts
2006
2007
2008
2009
Average Income of Middle Fifth (2007 Dollars)
Average Income of Bottom Fifth (2007 Dollars)
$17,000
Poverty Rate, 2000-2009 (Forecast)
16%
Historical
14%
Forecast
12%
Poverty Rate
10%
8%
6%
4%
2%
0%
2000
2001
2002
2003
2004
Source: EPI Analysis of BLS data and Goldman-Sachs unemployment rate forecasts
2005
2006
2007
2008
2009
Employment Projections, With and Without Stimulus Package
145
With Stimulus
2012 Q4: 144 million
Payroll Employment (Millions)
No Stimulus
140
135
2012 Q4: 140 million
130
Stimulus creates 4 million jobs by Q4 2012
125
2005
2006
2007
Source: Mark Zandi, Moody’s economy.com
2008
2009
2010
2011
2012
Unemployment Projections, With and Without Stimulus Package
12
With Stimulus
10
Unemployment Rate
2012 Q4: 7.6%
No Stimulus
8
6
4
2012 Q4: 5.5%
2
Stimulus lowers unemployment by 2.1% in Q4 2012
0
2005
2006
2007
Source: Mark Zandi, Moody’s economy.com
2008
2009
2010
2011
2012
Un-Real Economy
• Financial Markets: Dow, Nasdaq, S&P
500, Russell 2000…all down about 40%
ytd.
• But: good news…”Ted Spread” responding
• Housing: some signs bottom in sight, but
no signs re uptick…prices still
falling…inventory overhang;
• TARP: Certainly not a confidence builder
yet.
• Fed: pushing on string but not giving up.
Pres/VP Elect
• Fiscal constraints?
• Deficit could go as high as 6% of GDP, but
debt around 40% (avg 46% in 1990s).
• Must he alter his long-term plans--hth
care/energy?
• There is a time for budget austerity; this
ain’t it.
• Middle-class, poor, labor agenda (EFCA,
min wg, UI reform, OSHA, etc…)
Their Agenda
• Morph his recovery package with House
D’s (Making Work Pay tax cuts; new jobs
tax credit; mortgage relief; small biz, UI)
• Manage TARP
• Tax agenda
• Energy/Health Care
• Infrastructure (who gets the jobs?)
• Regulation (Cooper Union speech)
What Have We Learned?
•
•
•
•
•
Markets
Ineq
Public investment
No more TBTF
Financial markets
Learned…cont.
•
•
•
•
•
Budget priorities
Supply-side
Amply funded gov’t
Shampoo economy
Better economists