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Middle-, lower-income workers not feeling recovery, data show

  • Washington Post
  • Published Saturday, July 20, 2013, at 10:03 p.m.

The economic recovery of summer 2013 is playing out in an all-too-familiar way for poor and middle-class Americans: Gas prices are up, growth is slowing, and there still aren’t nearly enough jobs to employ the almost 12 million people who are looking for work.

An improving housing market and rising stock prices appear to have done little to boost the take-home pay of the typical American worker. And while the U.S. economy continues to heal faster than almost any other Western nation, evidence remains strong that the recovery has done little to boost the fortunes of people in the vast economic middle.

The Labor Department reported this month that average earnings have barely grown faster than inflation over the past year. Data from spring show that median earnings – those of the worker smack in the middle of the middle class – have fallen 4 percent since the recession ended, after adjusting for inflation.

Researchers at the Federal Reserve Bank of San Francisco reported this week that wage growth across the economy is continuing to slow in the wake of the recession, in a way similar to the past two recessions but counter to previous recoveries in the 20th century. The researchers warned that wage growth is likely to continue to slow “long after the unemployment rate has returned to more normal levels.”

Some housing analysts say the hot growth in prices in certain parts of the country, such as New York City and the San Francisco Bay area, is exacerbating an “affordability gap” that hurts the lower-income residents of those regions. Cameron Findlay, the chief economist for mortgage lender Discover Home Loans, says that lending is “on fire” in the so-called jumbo-loan section of the market, which finances more expensive homes, and that “below that range, you’re definitely going to see consumers start to struggle with affording a home amid rising mortgage rates.”

Officials at one of the nation’s most powerful labor unions, the AFL-CIO, made little attempt to hide their frustration with the pace and the nature of the recovery in an interview this week.

“It’s a pathetic recovery,” said Thea Lee, an economist and the union’s deputy chief of staff. “It really is extraordinary that four years ago we declared the recession over, but we’re not even within spitting distance of full employment.”

Business groups remain displeased with the rate of growth, particularly as economists cut their forecasts for gross domestic product growth this year. Chad Moutray, the chief economist for the National Association of Manufacturers, said that still-elevated unemployment is suppressing wage growth across the economy, and he lamented how manufacturers have shed jobs on net over the past several months.

The bottom line in the economy, Moutray said, “is we’re not growing fast enough.”

The OECD warned Tuesday that the United States retains a persistently large group of long-term unemployed workers and said lawmakers “should consider doing more to help these workers find suitable new jobs quickly, especially those groups most at risk of remaining jobless for a considerable period.”

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