Tag Archives: recession

Economic Trends and Indicators in Post Recession America

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By Bikna Huang

Since 2001, the American economy has been in and out of recessions.  In 2008, the latest and most severe economic downturn began. The economy today is objectively much better than it was in 2008 when the effects of the Great Recession first hit. For example, looking at the tax revenue comparing the years 2007 to 2011 shows that tax revenue is returning to 2007 levels.  Specifically, as the chart below shows, tax revenue from individual and corporation income taxes has increased from $898,549 (millions) in 2010 to $1,091,473 (millions) in 2011. What does this increase in tax revenue mean for the American economy? Does this mean the economy is making a turn in the right direction?

 

Looking at the graph, the amount of tax revenues was lowest in 2009 and 2010 when the recession hit America the hardest. However, in 2011, the revenues show an increase and a possible indication of the American economy moving in the right direction. It has been reported that tax collections (including all forms of taxation) has been growing for eight straight quarters now. On a more local level, some states have been more successful than others in tax collections in 2011. The Nelson A. Rockefeller Institute of Government reported that in 17 states the tax collections from the last quarter in 2011 had been lower than they had been four years ago, in 2008.

Nonetheless, tax collections in all 50 states have reported increases in 2011 compared to the tax collections from 2010. North Dakota, Illinois, Arizona, and Indiana have the highest reported tax collection increases from 2011. These states have profited from the oil and gas industries in the area in terms of tax collections. In California, tax collections grew by 11.3% than the previous year. The increases in tax collections indicates a more stabilizing American economy, but states like California will still face economic hardship even with an increase in tax collections.

It is still too early to tell whether the economy is actually improving, in fact, many people have mixed signals. Federal Reserve Chairman Ben S. Bernanke, is taking a “wait and see approach” with mixed signals regarding changes to inflation rates and interest rates. Bernanke and the Federal Reserve are looking into solutions that will help spur the economy without “undermining the credibility of the central bank as a bulwark against inflation.” The Federal Reserve estimates that the economy will grow 2.4 to 2.9 percent this year, and estimates that the unemployment rate could be as low as 7.8 to 8 percent by the end of the year.

The current unemployment rate is at 8.2 percent (March 2012), a 1.7 percent decrease from January 2010. The unemployment rate in January of 2010 was 9.9 percent, and the highest unemployment rate dated in American history was 10.80 percent which occurred in November of 1982.  In March 2012, 120,000 jobs were added to the job market, almost half the job gains in February.  Critics fear the results in April might not show similar results with the current economy growth because it may not be able to support thousands of new jobs.

Bikna Huang is an intern with TheFactFile.com who studies at CalPoly in San Luis Obispo, California.

 

January 2012 Unemployment Down in 45 States–Has the Long Anticipated Recovery Begun?

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In an economic news release published earlier today, the Bureau of Labor Statistics reported that unemployment fell in 45 states in January 2012.  In January, unemployment was down again in California—10.9% in January compared to 11.1% in December 2011 and 12.1% in January 2011. This marks the sixth straight month that unemployment has fallen in the state; a promising sign after years of economic stagnation. In an earlier post we noted how important the California economy is to the United States on the whole.  As we explained in that post, the reason we focus on California is that California is responsible for a full 12% of the country’s Gross Domestic product, the largest contributor of all the states and what happens in California gives economists a good idea where the country is headed as a whole.

Last month, we saw positive signs in California’s unemployment rate and this month, as we anticipated, the positive news has spread to 44 other states.  Perhaps the best news in this report is that there are signs of improvement in states where the employment situation had been abysmal through much of the recession.  For example, in Nevada unemployment was down to 12.7% in January 2012 from 13% in December 2011 and down from 13.8% in January 2012; Mississippi down to 9.9% from 10.4% the month before and 10.5% in January 2012; and, finally, Michigan, the poster child for the recession, was down 0.3% from December 2011 landing at 9% in January 2011 down nearly 2% from January 2011’s 10.9% rate. Taken together, these numbers show that the recovery that is underway is not a regional phenomenon, but truly occurring across the country.

February 2012 Unemployment 8.3%

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This morning, the Bureau of Labor Statistics released its report on the U.S. employment situation for February 2012, confirming the positive signs shown in ADP’s payroll figures released earlier this week.  As the chart below shows, while the unemployment rate stalled at 8.3% in February; 0.5% higher than January 2009 when President Obama was sworn in, but at the same as rate as his first full month in the presidency (February 2009) the economy added a significant number of jobs. (The chart is color coded red for months that President Bush was in office, and blue for President Obama).

In February, total nonfarm payroll increased by 227,000 jobs. Job growth was widespread throughout the entire private sector, with large increases in professional and business services (+82,000 jobs), health care and social assistance (+61,000 jobs), and manufacturing (+31,000 jobs). Government employment, however, continues to stagnate: in the past 12 months, the sector has lost 22,000 jobs.  Additionally, the change in total nonfarm payroll employment for December was revised from +203,000 to +223,000, and the change for January was revised from +243,000 to +284,000.
On the less positive front, the number of long-term unemployed (e.g., those who are unemployed for 27 weeks or longer) remained high in February at 5.4 million, accounting for 42.6% of the unemployed. However, that was down from 5.5 million in January.

In short, as with the recent upwardly revised numbers on GDP growth for the 4th quarter of 2010, the economy continues to trend in the right direction, nevertheless, it would appear that higher growth and more jobs are still needed to reverse the massive decline brought on by the Great Recession.

We would like to hear from you.  How does the employment situation look in your hometown?

 

Soaring Student Loan Defaults—What if Anything Can be Done?

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Recent news reports indicate that student loan delinquencies have reached more than $85 billion, with about 14 percent of all student loan holders being delinquent on their debt. The remaining 86 percent are either “paying as agreed,” in deferment, forbearance, or still in school.

Student loan debt is a persistent issue and was one of the clarion calls for the Occupy Wall Street movement. Thie increasing debt load of college students also spawned a national petition sponsored by Robert Applebaum that elicited a response from the Obama Administration last fall and more recently an official student loan complaint site from the Consumer Financial Protection Bureau.

The advocates in favor of student loan forgiveness argue that the stimulative effect on the economy of forgiving student loans would far outweigh any immediate loss from wiping out the debt. Supporters of this idea include Representative Hansen Clarke (D) of Michigan who has a bill pending in the 112th Congress to forgive student loans as a means of stimulus. Others, like Justin Wolfers, call forgiving student loans “the worst idea ever.” Mr. Wolfers’ argument is that, not only is it a bad idea to forgive student loans, it sets a bad precedent. Wolfers writes: “This is a bunch of kids who don’t want to pay their loans back. And worse: Do this once, and what will happen in the next recession? More lobbying for free money, rather than doing something socially constructive. Moreover, if these guys succeed, others will try, too. And we’ll just get more spending in the least socially productive part of our economy—the lobbying industry.”

The argument in favor of forgiving the debt rests primarily on the notion that freeing students from debt will allow them to become bigger consumers and in an economy that has more than 75% of its activity driven by consumer spending, more and bigger spending is important. There is another argument for proponents of forgiving the debt that would seem to have some support in at least one recent study. That argument is that forgiveness of student loans is akin to a tax rebate for people who actually do something “socially constructive” by putting in the time to get a college education.

That support comes from a recent Organisation for Economic Co-Operation and Development (OECD) country note on the United States that shows that college graduates in the United States “generate more public revenue” than college grads in any other OECD country. The OECD calculates that an average male college graduate in the United States contributes about $190,000 more public revenue than non-college educated men. (For women the figure is $90,000, and both are far above the OECD average of about $55,000 in spite of generally higher tax rates in other OECD countries). Thus, one could argue that forgiveness of up to $190,000 in student loan debt would be akin to a tax rebate for people who put in the time to go to college.

We would like to know what you think? Is forgiving student loans a good stimulus plan or is it just a giveaway to a bunch of would be freeloaders?