CBPP Senior Fellow Jared Bernstein testified today before the Joint Economic Committee on the progress that has been made in repairing the U.S. economy over the first five years of the recovery from the Great Recession.
When markets fail as massively as they did in the late 2000s, quick and forceful action clearly helps offset the damage. But to stop at stabilization, instead of rebuilding jobs and incomes that were lost over the downturn is a serious policy mistake, one that has proven to be extremely costly to working families. . . . [T]here is time to build on the recent momentum we’ve seen, particularly in the job market.
Bernstein pointed out that while there are many positive attributes to the current recovery, especially in relation to the depth of the previous recession, it is clearly not yet reaching everyone:
- Thanks in part to countercyclical policies legislated by Congress in 2009, along with aggressive monetary policy by the Federal Reserve, significant progress has been made in repairing the damage done by the uniquely deep recession that began in late 2007.
- These gains, while incomplete, are evident in the job market, particularly in the recent acceleration in job growth and decline in unemployment. After 52 consecutive months of net private sector job growth, non-government employment is up 9.7 million jobs since early 2010.
- Moreover, employment growth has accelerated in recent months. Payrolls added 1.4 million jobs in the first half of this year, their strongest six-month growth period since late 1999.
- Un- and underemployment are both down significantly over the recovery, as are other slack metrics that rose sharply in the downturn, including long-term unemployment and involuntary part-time work. While part of the decline in unemployment was due to labor force exits, this negative trend has also stabilized in recent months.
- Private payrolls grew about 3 percent faster over the first five years of this recovery compared to the prior recovery, despite the fact that the recession that preceded this expansion was much deeper in terms of lost output and much longer lasting than the downturn that preceded the 2000s expansion. The private sector added 3.4 million more jobs in the first five years of this recovery than were added in the last one.
- Yet, slack remains in the job market and wage growth has generally not yet accelerated; real median household income, after falling sharply by around 10 percent in the downturn, is up about 3 percent over the past few years, largely due to more work at flat real earnings. Corporate profitability and financial market returns, on the other hand, have more than recovered their losses.
Bernstein warned that policymakers cannot stop at stabilization. To prolong and strengthen the recovery, he recommended investing in infrastructure and increasing the federal minimum wage.