Right now there are two main economic narratives out there. The first is that the economy isn’t getting better, that for most people and most households, the recovery has been minimal, at best. The second is that the economy really is getting better overall, that job growth is picking up, wages are growing and fundamental improvements are being seen. The truth of the matter is that both are correct. These are not mutually exclusive storylines, even if they may appear to be. Below are a few graphs illustrating these trends.
Narrative One: No Real Progress
Examining median family income from the Census Bureau and median family net worth from the Federal Reserve shows that progress, such that it is, has barely kept pace with inflation. Median income in 2013 remains over 7 percent below pre-recession levels and median net worth is 40 percent lower. Much of the net worth for the typical family is tied to their home. With the housing crash, net worth fell, however the foreclosure crisis has held down gains in recovery as fewer people own their home today than a decade ago. Much of the wealth gains in recent years have been tied to asset markets and less to housing. So, for the typical worker or family, the recovery has brought gains in-line with the rate of inflation, but not significantly faster.
Narrative Two: Sizable Improvements Overall
Another way to characterize the economic recovery is that progress is being made overall. More individuals have jobs and wages are growing. The unemployment rate is falling, for both good and bad reasons. Given the demographic and structural trends, it can be helpful to focus on the so-called prime working age groups to see this progress. Below I have updated the data showing the employment-population ratio for 25-44 year olds. Here you can see that even with a lower labor force participation rate, more college enrollment and the like, the share of individuals with a job really is increasing. Oregon’s trends track the national average, although given the small sample size in the state, our data is more noisy from month to month.
While Portland, and it’s younger generations in particular, has been a hot topic lately (see the NY Times and a nice response from Joe Cortright), the city really is in the middle of the pack in terms of the employment-population ratio. Portland is right at the median of the 50 largest metros in the country. Ranking below Denver, Minneapolis and San Francisco, among others, but above places like Houston, Seattle, New York and L.A.
In total, the economy truly is getting better, with more individuals with a job, and wage growth is slightly faster than inflation. However, when it comes to the median worker, or the typical family, not much progress has been made. Both narratives are correct and they do coexist in today’s economy. In our office, we tend to focus more on the second narrative largely because our primary task is forecasting the total state economy and revenues from the economic activity. We focus less on the distribution of those gains (or losses) and more on the aggregate. That does not mean it’s a better way to characterize the economy, however it is important to understand both narratives to get a more complete picture of the progress, or lack thereof.