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Economic Update: Where are we, and what’s next?

May 5 th , 2012. Heidi Shierholz Economist, Economic Policy Institute. 2012 National Conference of the National Association of Planning Councils. Economic Update: Where are we, and what’s next?. Where we are now. Still need nearly 10 million jobs to get back to full employment.

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Economic Update: Where are we, and what’s next?

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  1. May 5th, 2012 Heidi Shierholz Economist, Economic Policy Institute 2012 National Conference of the National Association of Planning Councils Economic Update: Where are we, and what’s next?

  2. Where we are now

  3. Still need nearly 10 million jobs to get back to full employment

  4. Great Recession was worst recession in 70 years

  5. But this is not the worst recovery

  6. Though we have seen unprecedented public sector losses

  7. Unemployment has improved but its still very high

  8. And much of the improvement in the unemp rate has been from people dropping out

  9. Unemployment duration hasn’t improved much

  10. “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.

  11. Unemployment up for all groups of workers

  12. High unemployment => low wage growth(Year-over-year growth in nominal average hourly earnings)

  13. High unemployment => falling incomes

  14. High unemployment => rising poverty

  15. On top of four years of deep cuts, states still face large shortfalls

  16. Where we are headed

  17. Unemployment projections

  18. Unemployment projections by race (2012 circled)

  19. Unemployment Projections by state(For the states where you are from!)

  20. What Should be done

  21. At the National Level: • Gov’t has two main tools to boost economy: • Monetary policy (alas can’t do much when interest rates are basically zero) • 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.]

  22. 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.

  23. For more information Economic Policy Institute www.epi.org 1333 H Street, NW Suite 300, East Tower Washington, DC 20005-4707 202.775.8810

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