Prospects for 'new normal' of US economy
- By Yu Xiang
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E-mail China.org.cn, September 6, 2015
Third, unemployment rate was on the decline, but labor participation rate was also low.
Economic growth often means more new job opportunities and a rise in labor participation rate. The US unemployment rate had dropped from a high of 10 percent in October 2009 to 5.5 percent in May 2015, a low level seen in six and a half years. The Peterson Institute for International Economics previously predicted that such a low unemployment rate could not be achieved before the end of 2015 or early 2016.
With a continuing decline in unemployment, problems with structural imbalance in the labor market were also exposed. The first problem is chronic unemployment. Because they could not find full-time employment, about 6.6 million Americans are now working in part-time jobs. The number of chronically unemployed, those without a job for more than six months, is as high as 2.709 million. The labor participation rate, a gauge to measure the proportion of the employed and job-seekers in the total labor force, was a mere 62.8 percent in February 2015, the lowest level in 37 years. This shows that a big number of laborers has been unwilling to apply for new jobs and those workers have voluntarily exited the labor market. The second problem is that the living conditions of laborers did not show much improvement in the wake of rising job opportunities. According to a poll by the Pew Research Center, due to factors such as price hikes, about 25 million of the middle class have fallen into the group who live from paycheck to paycheck (spending all their monthly wages and not having a penny left to save). The third problem is that a rising number of jobs with low pay could probably become a "new normal". According to a report from the National Employment Law Project, a national advocacy organization for employment rights of lower-wage workers, the major reason for the asynchronization in the improvement of laborers' living conditions with the rise in employment is that most new employment opportunities are lower-paid jobs. During the economic recession, the proportion of lower-paid jobs lost accounted for 22 percent, but of the new jobs created during the economic recovery, the lower-paid ones accounted for 44 percent. Meanwhile, high-paid jobs lost during the recession accounted for 41 percent of the total, but the number of new high-paid jobs created during the recovery accounted for merely 30 percent of the total new employment opportunities.
Fourth, total social wealth increased, but the gap between the rich and the poor was further widened.
According to data released by the Federal Reserve on March 12, total assets of American families and nonprofit organizations had amounted to US$149.6 trillion in 2014, and their net assets were valued at US$8.29 trillion, a record high in the US history. Data released by the US Census Bureau in September 2014, however, showed that the median income of American families in 2013 was US$51,900, an approximately 4 percent drop from the figure of US$54,000 in 2009. According to poll findings by the Pew Research Center, the wealth median of American high-income families in 2013 was US$639,000, about 6.6 times the figure of middle-income families (US$96,500), and about 70 times the figure for low-income families (US$9,300). The wealth gap was the biggest ever since the US Census Bureau began to track wealth-gap figures in 1967, and the United States therefore has become the most unequal country among all developed nations.
From the long-term perspective, the seemingly contradictory phenomena with the US economy are expected to persist. "Moderate growth, low inflation, low labor participation rate and a growing wealth gap" will, for a considerable period of time, become the "new normal" of the US economy.
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