Saturday, January 31, 2015
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

US economy, though sluggish, may now be sturdier

By
From page B5 | July 24, 2014 |

WASHINGTON — Out of a seemingly hollow recovery from the Great Recession, a more durable if still slow-growing U.S. economy has emerged.

That conclusion, one held by a growing number of economists, might surprise many people. After all, in the five years since the recession officially ended, Americans’ pay has basically stagnated. Millions remain unemployed or have abandoned their job searches. Economic growth is merely plodding along.

Yet as the economy has slowly healed, analysts say it has replaced some critical weaknesses with newfound strengths. Among the trends:

— Fewer people are piling up credit card debt or taking on risky mortgages. This should make growth more sustainable and avoid a cycle of extreme booms and busts.

— Banks are more profitable and holding additional cash to help protect against a repeat of the 2008 market meltdown.

— More workers hold advanced degrees. Education typically leads to higher wages and greater job security, reducing the likelihood of unemployment.

— Inflation is under control. Runaway price increases would be destructive. Low inflation can lay a foundation for growth.

— Millions who have reached retirement age are staying on the job. This lessens the economic drag from retiring baby boomers and helps sustain consumer spending.

Over the long run, such trends could help produce a sturdier economy, one less prone to the kind of runaway growth that often ends in a steep and sudden slump.

The downside? At least in the short term, these same trends have prevented the economy from accelerating. When consumers borrow and spend less freely, for example, they restrain growth.

And when people seek to work longer or become more educated, often there aren’t enough jobs for all of them, at least not right away. People with advanced degrees can often find lower-paying jobs that don’t require much education. But when they do, they tend to push some people with only a high school education into unemployment.

One of the most striking trends in the recovery has been an aversion to personal debt. A typical U.S. household owes $7,122 in credit card debt, $1,618 less than at the start of the recession, according to analysis of New York Federal Reserve data by the firm Nerd Wallet. (After factoring in inflation, the balance is $2,900 lower.)

Kevin Quigley, a massage therapist, found that by the time the recession struck, his card balance had ballooned to as much as $35,000. The 33-year old from University City, Missouri ascribed that to “thinking that I needed a lot of things.”

Beginning in 2010, he consolidated his card debt and reduced it by $300 a month until it disappeared.

“Peace of mind became more important to me than stuff,” Quigley said.

Two primary factors explain the decline in card debt: Lending standards were tightened, and consumers “just kind of froze in place,” said Jelena Ewart, general manager of credit cards and banking at Nerd Wallet.

The American Bankers Association says card debt as a share of people’s income has reached its lowest level in more than a decade. People increasingly pay off balances each month. And just 2.44 percent of card accounts are delinquent, compared with the 15-year average of 3.82 percent.

Researchers at the Cleveland Fed found that after adjusting for inflation, debt from mortgage and auto loans remains below pre-recession levels. Applications for credit by “deep subprime” borrowers — those most at risk of defaulting — have dropped 36 percent from pre-recession highs.

Because people are taking on less debt, they’re also spending less. That phenomenon has slowed growth because consumers fuel most of the U.S. economy.

Consumer spending has risen just 10.8 percent during the five-year recovery — the smallest increase among expansions in the last 55 years, said Carl Tannenbaum, chief economist at Northern Trust.

But after the frugality of the past half-decade, money that once went to repaying credit cards can now be spent in ways that boost growth.

“There are some families who can contemplate vacations for the first time in a while, who can contemplate replacing their jalopies,” Tannenbaum said.

Declining debt loads have coincided with stronger cash buffers that banks have built up to protect against possible losses. More than 30 percent of banks were unprofitable in 2009, a share that sank to 7.28 percent through the first three months of 2014, according to the Federal Deposit Insurance Corporation.

Fed Chair Janet Yellen has said she no longer sees a “systemic threat” from over-extended banks.

Inflation has also been running below the Fed’s 2 percent target. Not only have consumers enjoyed relatively stable prices, but the Fed has been able to stimulate growth by holding interest rates down without risking any immediate threat of igniting inflation.

Americans have also used the recovery to return to school. The share of adults with advanced degrees jumped to 11.7 percent from 9.9 percent in 2007, according to the Census Bureau. During the recovery, the number of Americans with a college degree surpassed the number with only a high school diploma for the first time.

The unemployment rate for college graduates is 3.3 percent vs. 5.8 percent for high school graduates and 9.1 percent for high school dropouts. Someone with a master’s degree earns on average $69,108 a year, more than double what someone with only a high school diploma earns.

Over time, more people with advanced degrees should put a greater percentage of Americans into better-paying skilled jobs. For now, though, some educated Americans have moved into jobs requiring only a high school degree and left many of those without degrees jobless. Just 54 percent of high school graduates are employed, compared with 60 percent before the recession.

A similar development has occurred as workers have delayed retirement. The proportion of Americans older than 65 who are working has risen to 22.7 percent from roughly 20 percent during the recession.

These older workers tend to be better educated, so they command higher pay than the broader population, Gary Burtless, a senior fellow at the Brookings Institution, has concluded. And by continuing to draw a paycheck, they pay taxes, which should ease the budgetary pressures on younger generations.

Still, the rising proportion of older workers has kept some younger workers from receiving promotions or being hired.

“For lot of folks in their 20s and 30s looking to get established in their careers, it does represent a hardship,” Burtless said.

That hardship should gradually diminish on the strength of continued job growth. Employers have added more than 200,000 jobs a month for five straight months — the best such stretch since the late 1990s.

“If the economy gets close to its full employment potential, it’s a great thing,” Burtless said.

 

The Associated Press

The Associated Press

LEAVE A COMMENT

Discussion | No comments

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

.

Solano News

Solano County confirms 1st local case of measles

By Staff and wire reports | From Page: A1

 
SPCA begins caring for more than 100 rescued dogs

By Kevin W. Green | From Page: A1, 2 Comments | Gallery

 
Top workers, top students – and succulent crab

By Susan Hiland | From Page: A2

 
 
Partial Fairfield freeway road closure starts Monday

By Ryan McCarthy | From Page: A3

DUI patrols set for Super Bowl Sunday

By Ryan McCarthy | From Page: A3

 
Armijo students savor catered Fuddruckers lunch

By Susan Hiland And Susan Winlow | From Page: A3 | Gallery

Fairfield police log: Jan. 29, 2015

By Susan Hiland | From Page: A9

 
Suisun City police log: Jan. 29, 2015

By Susan Hiland | From Page: A9

 
.

US / World

Stanford University to get $50 million to produce vaccines

By The Associated Press | From Page: A3

 
Man charged in California family’s deaths will be own lawyer

By The Associated Press | From Page: A3

Yosemite park fee hikes coming in March

By The Associated Press | From Page: A4

 
San Francisco coroner says human remains are from 1 man

By The Associated Press | From Page: A4

PG&E releases thousands of emails with state regulators

By The Associated Press | From Page: A4

 
Judge: Funeral home wrongly sold Lee Harvey Oswald’s casket

By The Associated Press | From Page: A5

Jordan awaits proof hostage is alive after swap deadline

By The Associated Press | From Page: A5

 
Judge expresses doubt about constitutionality of no-fly list

By The Associated Press | From Page: A5

 
French fracture laid bare as 8-year-old praises terrorists

By The Associated Press | From Page: A5

Africans open new front in war on terror to fight Boko Haram

By The Associated Press | From Page: A5

 
US mulls Middle East-North Africa category for 2020 Census

By The Associated Press | From Page: A5

Balloon crew makes history crossing Pacific Ocean

By The Associated Press | From Page: A5

 
Murder trial begins 35 years after 6-year-old vanished in NY

By The Associated Press | From Page: A5

 
.

Opinion

 
GOP should plan for post-Obamacare world

By Ramesh Ponnuru | From Page: A8

Editorial Cartoon: Jan. 31, 2015

By Daily Republic Syndicated Content | From Page: A8

 
Solano College news makes me sick

By Letter to the Editor | From Page: A8

.

Living

Today in History: Jan. 31, 2015

By The Associated Press | From Page: A2

 
Community Calendar: Jan. 31, 2015

By Susan Hiland | From Page: A2

Horoscopes: Jan. 31, 2015

By Holiday Mathis | From Page: B7

 
My recently widowed mother is already thinking about re-marrying

By Kathy Mitchell and Marcy Sugar | From Page: B7

Five ways 3D-printed food will change the way we eat

By The Washington Post | From Page: B10

 
.

Entertainment

TVGrid

By Daily Republic Syndicated Content | From Page: B5

 
List: 10 Super Bowl ads you’ll be talking about

By The Associated Press | From Page: A7

Rod McKuen, mega-selling poet and performer, dies at 81

By The Associated Press | From Page: A7

 
Miranda Lambert leads ACM Awards with 8 nominations

By The Associated Press | From Page: A7

Shakira gives birth to 2nd baby with Spanish football star

By The Associated Press | From Page: A7

 
Ex-rap mogul ‘Suge’ Knight arrested in deadly hit-and-run

By The Associated Press | From Page: A7

.

Sports

 
Mustangs ride away from Indian’s home court with 66-60 victory

By Marcus Lomtong | From Page: B1 | Gallery

 
Hayward, Utah Jazz upset Golden State Warriors 110-100

By The Associated Press | From Page: B1

LeBron returns, Love, Irving team for 44, as Cavs top Kings

By The Associated Press | From Page: B1

 
Laird leads as Tiger shoots 82 and misses the cut

By The Associated Press | From Page: B2

Seau, Warner, Pace first-time Hall eligibles

By The Associated Press | From Page: B2

 
Djokovic beats Wawrinka to reach fifth Australian Open final

By The Associated Press | From Page: B2

N.H. Speedway general manager faces lewdness charge

By The Associated Press | From Page: B2

 
Kings’ Cousins to replace Kobe Bryant in All-Star game

By The Associated Press | From Page: B2

Judge: Jury can watch Super Bowl unless Hernandez mentioned

By The Associated Press | From Page: B2

 
Blackhawks Hall of Famer Stan Mikita has brain disorder

By The Associated Press | From Page: B2

Ko takes lead at LPGA opener, closes in on golf history

By The Associated Press | From Page: B2

 
Carroll says decision is Sherman’s if baby arrives early

By The Associated Press | From Page: B3

NFL’s Goodell seeks to look past ‘tough year,’ to future

By The Associated Press | From Page: B3

 
This date in sports history for Jan. 31, 2015

By The Associated Press | From Page: B4

 
.

Business

US consumer confidence at highest level in a decade

By The Associated Press | From Page: A1

 
Companies steering clear of Super Bowl name

By The Associated Press | From Page: B5

.

Obituaries

Danica Gojkovich Ryder

By Nancy Green | From Page: A4

 
WillIiam “Bill” Hunter

By Nancy Green | From Page: A4

Garry A. Britton

By Nancy Green | From Page: A4

 
Anneliese Edith (Luckner) Fraser

By Nancy Green | From Page: A4

Anthony Neal Hunley

By Nancy Green | From Page: A4

 
Frank Z. Perez

By Nancy Green | From Page: A4

Joe Lambert Robinson

By Nancy Green | From Page: A4

 
Otilia (Tela) Quinn

By Nancy Green | From Page: A4

.

Comics

Beetle Bailey

By Daily Republic Syndicated Content | From Page: B6

 
Pickles

By Daily Republic Syndicated Content | From Page: B6

Blondie

By Daily Republic Syndicated Content | From Page: B6

 
Zits

By Daily Republic Syndicated Content | From Page: B6

Garfield

By Daily Republic Syndicated Content | From Page: B6

 
Peanuts

By Daily Republic Syndicated Content | From Page: B6

B.C.

By Daily Republic Syndicated Content | From Page: B6

 
Dilbert

By Daily Republic Syndicated Content | From Page: B6

Frank and Ernest

By Daily Republic Syndicated Content | From Page: B6

 
Baldo

By Daily Republic Syndicated Content | From Page: B6

Rose is Rose

By Daily Republic Syndicated Content | From Page: B6

 
Baby Blues

By Daily Republic Syndicated Content | From Page: B6

Sally Forth

By Daily Republic Syndicated Content | From Page: B6

 
Get Fuzzy

By Daily Republic Syndicated Content | From Page: B6

Wizard of Id

By Daily Republic Syndicated Content | From Page: B6

 
For Better or Worse

By Daily Republic Syndicated Content | From Page: B6

Crossword

By Daily Republic Syndicated Content | From Page: B7

 
Bridge

By Daily Republic Syndicated Content | From Page: B7

Cryptoquote

By Daily Republic Syndicated Content | From Page: B7

 
Word Sleuth

By Daily Republic Syndicated Content | From Page: B7

Sudoku

By Daily Republic Syndicated Content | From Page: B7

 
.

Home Seller 1/31/2015

Quirky add-ons a common feature of celebrity homes

By The Associated Press | From Page: HSR2

Real estate transactions for Jan. 31, 2015

By Daily Republic | From Page: HSR3

5 ways to make a kitchen more germ-free

By The Associated Press | From Page: HSR3

Average US rate on 30-year mortgage rises to 3.66 percent

By The Associated Press | From Page: HSR3