U.S. Senator Bob Casey (D-PA), chairman of the U.S. Congress Joint Economic Committee, on Dec. 18 released the 2012 Joint Economic Report to provide an overview of the state of the U.S. economy in 2012. Casey said, “While the economy improved in 2012, far too many Americans are still out of work and the impending fiscal cliff threatens to return our economy to recession. Republicans and Democrats must work together to approach the fiscal cliff in a balanced way that allows us to continue to focus on job creation in 2013.”
Mandated by the 1946 Employment Act, the JEC’s Annual Report examines the progress of the economic recovery in 2012 and identifies the challenges that remain toward achieving full recovery.
The year 2012 was characterized by modest economic growth as labor markets continued to recover from the Great Recession. The unemployment rate dropped 0.8 percent in the first 11 months of the year, reaching a low of 7.7 percent in November. The economy has recovered nearly 60 percent of the private-sector positions lost during and in the wake of the Great Recession.
- The U.S. economy grew 2.0 percent over the course of last year and, on average, it has maintained that modest pace over the first three quarters of this year. As was the case last year, the U.S. economy has grown at a more subdued pace this year than forecasters had expected at the start of the year. Economic growth over the past several quarters has been uneven, with real (inflation-adjusted) gross domestic product (GDP) growing at an annual rate of 2.0 percent in the first quarter of this year, 1.3 percent in the second quarter and 2.7 percent in the third quarter.
- A disproportionately high share of the private-sector job loss during the recession was borne by goods-producing industries (especially construction and manufacturing) and the employment recovery for goods producers still has some way to go. The payrolls of private service providers, on the other hand, had nearly fully recovered to pre-recession levels by November.
- The relatively slow pace of the current expansion is somewhat puzzling. The recession that preceded it was the sharpest and most protracted U.S. decline since the 1930s and economists have long noted that relatively deep downturns tend to be followed by relatively steep recoveries. That this has not been the case during the current recovery.
- A significant factor that has worked to impede growth in consumer spending has been the decline and slow recovery in household wealth. As the housing market collapsed and equity markets followed, household net worth plunged to a degree not seen since the 1930s. Declines in the value of owner-occupied housing were substantial and persisted essentially to the start of this year. So far this year, home prices have tended to appreciate, bolstering the value of the housing stock. Even so, as of the third quarter of this year, household wealth remains $1.232 trillion below the level that prevailed at the end of 2007. Continued support from accommodative monetary policy and growth-enhancing fiscal policy is necessary to complete the recovery of household wealth.