Far From Over

The economy is "still crawling out of a very deep hole," writes The New York Times.

April 10, 2012

NEW YORK - The New York Times presented a sobering view of the latest economic data, "a painful reminder that nearly three years into the expansion, the recovery has been a climb toward the rim of the crater left by the Great Recession, not an ascent to new economic heights."

Most worrying are deficits in the jobs and home equity sectors, "those areas that matter most to most Americans."

While the economy has added 3.6 million jobs since unemployment reached its low in February 2010, it is still nearly 10 million jobs short of regaining the 5.2 million lost in the recession and 4.7 million to employ new labor market entrants.

According to the Economic Policy Institute, at the average rate of job creation the past three months, it would take until the end of 2017 to return to the prerecession jobless rate of 5%.

Without jobs, family income remains low which translates into weak spending. According to a Moody??s Analytics analysis of government data, median household income in 2011 dollars peaked at $56,000 in 2000. Today, it stands at $52,000, the same where it was in 1997.

Additionally, home equity "has been devastated by the housing bust," wiping out $7.4 trillion since 2006. According to the Times, nearly 12 million homeowners owe more on their mortgages than their homes are work and will never reverse that imbalance.

While the stock market and consumer spending are rising, the Times said this is attributable to the top tier of earner, a lopsidedness that "doesn??t presage broadly higher living standards."

As a solution, the Times said Congress should renew federal jobless benefits beyond their expiration at the end of this year, and if incomes and spending remain low, it should extend tax relief to low- and middle-income earners, allowing the high-end tax cuts implemented during the Bush to expire.

While Congress has committed to deficit reduction beginning next year, it should avoid "heedless" cuts and instead favor balanced tax increases and spending reductions.

"A self-reinforcing, virtuous cycle of growth has yet to take firm hold," the Times concludes, "and until it does, the need for help remains."

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