We've reached the halfway point of 2013. We are nearing the five-year anniversary of the most intense phase of the great financial crisis, and are now at the four-year anniversary of the beginning of the recovery from the Great Recession. So, as Ed Koch might ask, how're we doing?
The answer, as always on Wonkblog, can be found in the charts. Here are the 27 charts that show how the economy is doing as the second half of the year begins.
We (still) aren't living up to our potential
The broadest measure of how the economy is doing is gross domestic product, the value of all goods and services produced within U.S. borders in a given time period. And it has been rising only slowly: 1.8 percent in the first three months of 2013. The government's first take on the second quarter number will be released on July 31.
Here's a better way to think of GDP, though: Not as a raw number or even a percent change. But how the U.S. economy is doing relative to its potential. That is, if almost everyone who wanted a job had one, if factories were running at their full capacity, if office buildings were full, how much more economic activity would we have. The answer is quite a lot!
Here is actual GDP versus the Congressional Budget Office's best estimate of potential GDP.
That output gap was $843 billion (at an annual rate) in the first quarter of 2013, meaning that the nation would need to crank out goods and services at a 6 percent faster rate than it is to be functioning at its potential. The good news: That's a good bit smaller than the $949 billion output gap at the start of 2009. The bad news: It actually rose over the past year, from $811 billion in the first quarter of 2012. Until the blue line in the chart above starts to converge faster to the red line, the economy still isn't going to feel very good.
Jobs, jobs, jobs.
The biggest problem facing the U.S. economy since the end of the recession has been a moribund job market. So are we making any progress changing that?
The most widely-watched measure of the job market is the unemployment rate, the percentage of people who want a job who can't find one. By that measure, the job market is indeed recording steady progress. From a recent high of 10 percent in October 2009 and 7.8 percent at the end of 2012, the figure was 7.6 percent in May and on a gradual, downward track. The June number will be released on Friday.
But the unemployment rate alone doesn't tell you everything you need to know about the job market; a substantial part of the decline in the jobless rate has come not because of people finding jobs, but because of people dropping out of the labor force entirely. A measure that adjusts for that phenomenon is the employment to population rate, the proportion of the total U.S. population that has a job. And by that measure, there is a whole lot less progress:
During the recession, the employment population ratio took a steep dive. But it has recovered only a smidgen: from a low of 58.2 percent in November 2010 to 58.6 percent in May. That's the same level as in December: In other words, there has been no progress in putting a higher proportion of Americans to work so far in 2013.
But part of that phenomenon is likely demographic; as the baby boom generation has hit retirement age, more people may be leaving the workforce voluntarily. One way to avoid that problem is to look at the employment level of just 25 to 54 year-old men, a group that is in prime working years and for whom the numbers aren't affected by the long-term shift of women into the workforce. Alas, this measure too shows something closer to stagnation in the job market than genuine improvement.
But what matters for an individual looking for work is how many jobs are out there. And here, there is a little more progress. This chart shows the ratio of job openings
It shows that there has indeed been steady progress toward a more normal job market in which the number of job seekers aligns more closely with the number of openings--though in 2013, four years into the recovery, the ratio is still higher than it was at its highest point in the aftermath of the 2001 recession. Still, this is an area of progress in the job market, if uneven and halting.
But where's the growth coming from?
So the job market is getting a little bit better, really slowly. But where is that growth coming from? Here is the breakdown of how much various segments of the economy contributed to growth in the first three months of the year:
As it shows, the biggest driver of economic activity right now is the American consumer, who are spending more freely. Business spending is rising only slowly. Housing is a plus, but it is off of such a small base that construction activity isn't really moving the dial much for overall growth. And falling government spending is subtracting from growth.
So what's driving the consumer? Well, a few things.
The stock market has been rising.
So have housing prices (this is the Case-Shiller home price index covering 20 major metro areas, since January 2012).
The result: Americans are wealthier. Household assets are now above their (non-inflation adjusted) level before the recession.
Americans not only have more assets. They also have made some progress getting out from under the debts that accumulated during three decades of rising indebtedness that preceded the crisis.
So consumers are in better shape. But what's holding the economy back? Well, an important part of the story seems to be the retrenchment by government at all levels.
Compare, for example, the contraction in inflation-adjusted government spending since 2010 with the steady increases that occurred through the aftermath of the 2001 recession.
The question for the remaining six months of 2013, then, is which will prove more powerful. The contractionary drag coming from government? Or the improvement in the private sector, including in housing and household balance sheets? A look at what the future may hold for the U.S. economy, WITH YET MORE CHARTS, is coming soon.