The US Has Come How Far Since The Great Recession? A Look at U-6 and Drought Conditions

Categories: Commentary, Uncategorized |

April 28, 2014

This week I offer up perspective on how far our country has come since the Great Recession – you may not be as impressed as some politicians and media would like us to believe.  Candidly, when I started to take a look at the data (in preparation for an upcoming panel presentation) I did not expect these results.  From there, I bring your attention to a condition in California that doesn’t seem to get much national attention and conclude with a few points around recently released data regarding Labor Underutilization.

How the US Has Faired Since the Great Recession

It seems no matter which media source you look to, the US recovery from the Great Recession is categorized as “resilient.”  In case you didn’t know, the National Bureau of Economic Research says the recovery began in June 2009 – over 58 months ago.  While that is one of the longest stretches of growth since World War II, this recovery is also categorized as one of the most “lackluster” in modern times.  I guess that can be called “resilient.”  Sticking with the theme, some data that supports resiliency:

  • Unemployment is 6.7% (down from over 9%) but one cannot dispute that job and labor force growth are barely keeping pace with population growth (more on this in a moment)
  • GDP has grown 1.8% a year on average (half the pace of the previous three expansions but at least it has grown)

For those who prefer “lackluster”, the blame game goes whichever way your political stripes desire.  As Tevye from Fiddler on the Roof would say, “on the one hand,” Republicans say the President and Congress have made things worse by raising taxes, debt and regulation – creating uncertainty and dissuading businesses from investing and hiring.  “On the other hand,” Democrats blame Republicans for withholding support for stimulus spending at the time the economy needs a boost.

Here is what we know – across the US – the recovery has been uneven at best.  Growth is well below what everyone has hoped for by now – GDP of about 2% (“new normal”) despite highly accommodative monetary policy that will continue until we see inflation where the Fed wants it (previously it was until we saw unemployment where the Fed wanted).

Some data, Courtesy of DIVER Data Services and Mu, which demonstrates the uneven and “lackluster” nature of this “resilient” recovery (like how I did that?).   For those of you that are faint of heart, you may want to skip the next few paragraphs and go directly to the U-6 section.

  • Philly Fed, Leading Index (predicts six month growth rate in Coincident Index) ranges from -1.32% to +5.36% with an average of 1.52% — not even the “about 2%”
  • Employment – Some startling data points. Looking at end of year 2008 to end of year 2013:
    • Labor Force – up in 23 and down in 29 States/territories (but overall up – can “spin” this both ways)
    • Employed – number up in 26 and down in 26 States/territories – (again, overall up)
    • Population Growth – Up in 48 and down in 4 States/territories
    • Employed as a % of Population – Up in 3 and down in 49 States/territories—overall -1.43%!
      • Up in DC, Maine and Texas

The impact here – income tax receipts and unemployment benefits.

  • Housing Prices for the period 2008-2013 show that 11 States had an increase in the pricing index (FHFA) while 40 have seen a decline. The impact here – assessed values and property taxes.  Below I show the top and bottom ten over the period.
State Housing Price Index
North Dakota 29.25%
District of Columbia 14.10%
South Dakota 6.92%
Texas 6.35%
Nebraska 4.78%
California 4.77%
Alaska 4.74%
Colorado 4.68%
Iowa 3.28%
Oklahoma 2.18%
State Housing Price Index
Nevada -16.89%
Rhode Island -14.69%
Georgia -14.09%
Idaho -13.73%
Illinois -12.77%
New Jersey -12.16%
Delaware -12.09%
Maryland -11.95%
Florida -11.79%
Washington -11.74%
  • Median Household Income (USCB) is greater in 34 States from 2008-2012 (last reported) but less in 17 States.

The impact is on income tax receipts and consumer spending (think sales tax receipts).   Below I show the top and bottom ten over the period.

State Median Household Income
District of Columbia 17.37%
West Virginia 14.63%
Maryland 12.75%
Minnesota 12.51%
North Dakota 12.36%
Texas 11.69%
Washington 9.81%
Vermont 9.62%
Tennessee 8.29%
Missouri 8.09%
State Median Household Income
Nevada -13.54%
Hawaii -8.55%
Utah -6.71%
Colorado -6.05%
New York -5.51%
Ohio -5.45%
South Dakota -4.23%
Delaware -3.41%
North Carolina -3.21%
Illinois -2.85%

As you digest the foregoing, consider those States that have been on the short end of the recovery.  In many cases, we know that many States have been responsible during this recovery and their prudence will allow them to be able to withstand the “lackluster” or “resilient” recovery.  Importantly, the expectation that spending can resume to where it was or programs can be restored will, in many places, need to wait.  There is still, in many places, business to take care of in the form of pension funded status and operational reform.

U-6 – Labor Underutilization

First the good news, Labor Underutilization (total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.  Marginally attached workers are those that have not actively searched for work in the past 4 weeks) for the first quarter of 2014, is down in 45 States compared to the same period last year.  That said, the percent fitting this definition ranges from a low of 5.5% (North Dakota) to a high of 17.4% (Nevada).  Here is a look at States that have seen this measure go the wrong way (up) and those with a Labor Underutilization Rate greater than 15%:

 Labor Underutilization Up Labor Underutilization >15%
Arizona Arizona
District of Columbia California
Kentucky Illinois
Massachusetts Michigan
Oklahoma Nevada
Tennessee Oregon
  Rhode Island

DIVER Analytics, Filter Module; BLS

For regular readers, it is worth looking at this data in conjunction with Job Growth data (see last week’s commentary) as well as income data.

Warning – Drought Conditions

California is suffering from a drought (maybe that helps explain why its Labor Underutilization is above 15%).  The drought is a fact and, despite some wet weather, it has gotten pretty bad with one estimate of the cost (direct and indirect) of the drought being almost $7.5 billion, this according to the California Farm Water Coalition.  The estimate includes crop losses and about 20,000 job losses in and associated with farming.  In addition to jobs, think of income and sales tax receipts as well as State aid that will undoubtedly be requested.  Oh, and don’t forget the cost of certain produce – lettuce, broccoli, tomatoes, cantaloupe (according to the CFWC) – watch your grocer’s shelves.  Below is a quick look at the drought out west – primarily impacting California – using data from the National Drought Mitigation Center.  The dark orange and red represent Severe, Extreme and Exceptional Drought conditions.

4-28 4-28 2

DIVER Analytics, Map Module

As California reports its tax receipts and plans its budget for the coming year, keep an eye on the projected impact of this reality.

A busy travel week for the team.  Mike is in Louisville and Minneapolis; Tim is in NJ and Gregg and Debra are in Baltimore for the Bond Buyer Conference.

Have a great week. 


Gregg L. Bienstock Esq.
CEO & Co-Founder, Lumesis, Inc.


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