Hope for a real recovery, with strong job and wage growth, is fading fast. Revised data released this morning show that the US economy grew more slowly this past spring than was originally believed. National gross domestic product (GDP) – the sum of all goods and services produced in the US – increased by just 1 percent in the second quarter and by an average of just 0.7 percent per quarter in the first half of the year. The economy needs to expand by at least four times that pace to bring about any meaningful reduction in the unemployment rate.
These data provide further reason to believe that the Governor’s jobs proposal, announced yesterday, will do little to boost California’s struggling economy, as we blogged yesterday. Businesses make hiring decisions based on demand for their products and services. But consumer spending nearly ground to a halt in the second quarter of this year, increasing by just 0.4 percent – the weakest growth since late 2009. For businesses to start hiring again, they need more customers, not tax incentives.
Today’s news also confirms many economists’ fears that the Great Recession has transformed into the Great Stagnation. Indeed, many forecasters recently revised their projections for national economic growth downward, reflecting a spate of bad economic news as well as the recent turmoil in financial markets – both here and abroad.
What would a prolonged slump mean for workers and their families? It would mean recession-like high unemployment as far as the eye can see, as well as weak wage growth. And research tells us that persistently high unemployment can take a significant and lasting toll on workers’ earnings, their health status, and even their children’s performance in school and future earnings. In other words, a persistently weak job market would not only be devastating for the workers of today, it could also be devastating for the workers of tomorrow.
In case you haven’t had your fill of bad economic news, watch for the CBP’s upcoming report, On the Edge: California’s Workers Still Face the Toughest Job Market in Decades, which will be released the day after Labor Day and will provide an in-depth look at the state’s economy including key trends in jobs, wages, and incomes.