Jerome H. Powell, chair of the Federal Reserve and one of the world’s top economic leaders, has spent much of 2018 telling people that the U.S. economy is strong and almost “too good to be true.” But last week, he stressed a different message — not everyone has been lifted by faster growth.
“The benefits of this strong economy and sound financial system have not reached all Americans,” Powell said in Dec. 3 speech. “The aggregate statistics tend to mask important disparities by income, race and geography.”
He repeated that message in a Dec. 6 speech. “While the economy is strong overall, we recognize that some communities have yet to feel the full benefits of the ongoing expansion,” he said.
The reality is that in a year when unemployment hit the lowest level in almost 50 years, with inflation staying low and growth popping after the tax cuts, a surprising number of red flags remain in the economy, especially compared with the last period of strong economic growth, in 1999-2000.
It’s a reminder, many experts say, that the U.S. economy has deep structural problems that are far from being cured.
Four in 10 adults still say they don’t have enough savings to cover a $400 emergency expense, according to the latest Federal Reserve report on the economic well-being of Americans. While that is an improvement over 2013, when half of Americans said they could not cover a $400 expense, it remains elevated at a time when unemployment is so low and wages are rising.
A substantial number of Americans — 45 percent — still rate the current economy as “only fair” or “poor,” according to a Gallup poll in November. Though that is better than in recent years, it is still far higher than November 2000, when only 29 percent of Americans gave the economy a poor grade.
Despite the abundance of “We’re hiring!” signs across the country, an alarming number of men in their prime working years are not employed or looking for work. The labor force participation rate for men ages 25 to 54 is 89 percent, which is below the pre-recession level (90.6 percent in November 2007) and well below what the rate was in 2000, when nearly 92 percent of men of prime age had jobs or were actively searching for work.
In another telling sign, the number of dollar stores has surged from 20,000 to 30,000 locations since 2011, according to a report by Marie Donahue and Stacy Mitchell of the Institute for Local Self-Reliance. These stores are growing rapidly in urban black neighborhoods and rural America, Donahue and Mitchell found, two parts of the country whose residents are starting to look like a “permanent underclass.”
Arguably the brightest spot in the U.S. economy is hiring. Companies continue to add workers at a rapid rate, yet even in the labor statistics, there is troubling data.
About 4.8 million Americans who want full-time employment are stuck in part-time jobs, according to the Labor Department. That is still above the pre-recession level and, even more alarming, has jumped by 423,000 since August.
Wages in several key sectors of the economy are also lagging behind, even at a time when employers say they can’t find enough people to hire and are offering more money. Average weekly pay, adjusted for inflation, fell slightly in the past year for transportation jobs and administrative and support jobs, according to Labor Department data. Average weekly wages in the hotel and food industries barely grew once inflation is factored in. These are some of the most common jobs for working-class Americans, who do not have college degrees and make about $30,000 to $69,000 for a household of three.
Suicide rates are so high that life expectancy is declining in the United States. On average, 129 suicides occur a day, according to the Centers for Disease Control and Prevention, and the suicide rate continues to climb, especially among middle-aged men. In every state but Nevada, suicide rates have increased since 1999.
Most of these problems are structural, not cyclical, and will not be reversed easily. Many of these issues emerged shortly after 2000, although they accelerated downward during the Great Recession. They are unlikely to be cured by faster growth alone, especially if that stronger growth lasts only for a year or two, as many economists now expect, and then retreats to around 2 percent annual growth in 2020 — or even into a recession.
Powell isn’t the only one reminding the country that deep problems remain, even as the rosy statistics pour in. Conservative scholar Oren Cass, a former adviser to Mitt Romney, is out with a book, “The Once and Future Worker: A Vision for the Renewal of Work in America,” that is getting a lot of attention. He argues even more forcefully that fixing many of these problems is the key to a stronger long-term economy and a better society, but it will take more than better GDP growth to get there.
“While growth is necessary to a prosperous society, it is not sufficient,” Cass wrote. “Not all growth is equally beneficial, and the policy choices that yield the most immediate short-term growth don’t necessarily prepare the ground for sustained economic and social progress.”
A year ago, some Republican lawmakers made the assertion during the tax debate that we just need to get growth going and everything else will fall into place. A year later, it is apparent that this is not fully the case.
Ideas are starting to come to the fore to address the deeper structural issues. The Trump administration has aggressively pushed apprenticeships, although it has also sought deep cutsin government-funded retraining programs. On the left, progressives have crafted legislation to raise the minimum wage and enact a “job guarantee,” although questions remain about how to fund it.
This week Trump signed an executive order creating the White House Opportunity and Revitalization Council, which is supposed to focus on aiding “impoverished neighborhoods that have been ignored by Washington in years past.” Cass has joined a bipartisan group of policy wonks calling for some sort of wage subsidy, and there has been bipartisan work in Congress to combat the opioid crisis. Efforts are building to try to help, but they remain modest, given the gravity of the problems the nation faces.
As the country heads into 2019 and 2020, the debate remains: What else can be done to help those left behind?
