From unemployment to debt to inequality, these are my Magnificent Seven economic charts for 2012!
1. The Obama White House’s frightening debt forecast. The president’s own Office of Management and Budget produced this chart showing the long-term fiscal impact of the administration’s 2013 budget plan. When House Budget Chairman Paul Ryan showed Treasury Secretary Timothy Geithner this chart, Geithner responded, “We’re not coming before you to say we have a definitive solution to that long-term problem. What we do know is we don’t like yours.”
2. US labor force participation has collapsed, overstating the health of the job market as measured by the unemployment rate. If the labor force participation rate was at its January 2009 level, the unemployment rate would be a whopping 10.7%. Some of the drop in the LFP is due to demographic reasons, primarily the aging of the US population. But even taking that into account would give you a much higher unemployment rate than the current 7.7%. If you go by the pre-recession CBO forecast of the 2012 LFP rate, the unemployment rate would be 10.4%.
3. The number of Americans working as a share of the population, perhaps the broadest measure of the health of the US labor market, remains in a depression. It plunged during the Great Recession and has yet to recover.
4. The economy is slowly creating jobs, but the Jobs Gap isn’t closing. The US lost 9 million private sector jobs during the Great Recession. Since job growth resumed, 5 million private sector jobs have been created. But as measured by economist Michael Darda of MKM Partners, the level of private sector jobs remains 13 million below the pre-crisis trend.
5. Likewise, the Growth Gap — where GDP is today versus its long-term trend line — also isn’t closing. If the recovery had been stronger, putting growth back on its traditional pace, cumulative GDP over the past five years would have been roughly $10.3 trillion higher.
6. Has the US median household income really stagnated over the past 30 years, as many liberals charge? No. This is a table rather than a chart, but it is still illustrative. Economist Richard Burkhauser of Cornell University found that when you properly measure household size and factor in transfer payments and the progressive tax code, real incomes actually rose nearly 40% over the period
7. The overly optimistic unemployment forecast of the Obama White House. 2012 was another bad year for perhaps the most infamous economic prediction in US political history. In January 2009, Obama economic advisers Jared Bernstein and Christina Romer said unemployment — as reflected in the chart they created — would not hit 8% if Congress passed the stimulus. Not only did unemployment actually hit 10%, but it is still way above their 2012 estimate of 5.2%.