Economy and Jobs Watch: Economic Recovery Still Shortchanging Workers

The gross domestic product (GDP) of the United States grew at a slower pace than expected during the first quarter of 2005 according to data released by the Commerce Department. At just 3.1 percent, it was the slowest rate of growth in over two years since the first quarter of 2003. Economists and financial market investors were caught off guard by the slow rate of growth. Nigel Gault, chief U.S. economist at Global Insight, stated, "I think we do have to get used to the idea that growth is going to remain substantially slower [now] than in the earlier part of the recovery." Caused mostly by higher energy costs, lower business investment, and an ever-widening trade gap, the slow economic growth is seen as hurting workers the most. Much of the drop in GDP growth is due to a falloff in the growth rates of both consumer spending and business investment, as well as the widening trade gap. With inflation and prices for goods -- especially foreign oil (although this has been dropping in the past number of days) -- on the rise, public consumption by both businesses and consumers is down. Final sales to domestic purchasers grew by only 3.2 percent this quarter. In 2004, the growth of sales to domestic purchasers was significantly higher, averaging 4.2 percent over all four quarters. Helping to slow economic growth was a decline in real, disposable personal income by 0.3 percent in the first quarter of 2005. The Economic Policy Institute (EPI) reported April 20 that "real wages continue to deteriorate for many U.S. workers" with private-sector jobs experiencing slower than usual wage and salary growth. In fact, March marked the 11th consecutive month in which annual wage growth failed to outpace inflation. Real hourly wages fell for the fifth consecutive quarter due to the continually and persistently weak job market, building upon a trend of either flat or declining wages relative to inflation throughout 2004. The chart below illustrates a worsening trend in real hourly wages from 2001 - 2005. This erosion of real wages, despite rapid productivity growth and continued job growth, is disappointing and a real detriment to working families' living standard. Source: The Economic Policy Institute's Jobwatch.org site This Feb. 16 report from the Economic Policy Institute and the Center on Budget and Policy Priorities also finds the only group to see wage gains from 2003 to 2004 were workers who had attended graduate school. While most workers have been left out of the economic recovery, it has negatively impacted low-income workers most severely.
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