MONEY Economy

WATCH: Job Growth Continues, But Unemployment Rises Too

The economy has added at least 200,000 jobs per month for six straight months, the longest such streak since 1997.

TIME cities

The Rise of Suburban Poverty in America

Rooftops in suburban development in Colorado Springs, Colorado.
Rooftops in suburban development in Colorado Springs, Colorado. Blend Images/Spaces Images/Getty Images

The suburbs aren't the middle-class haven many imagine them to be as new numbers show 16.5 million suburban Americans are living beneath the poverty line

Colorado Springs is often included on lists of the best places to live in America thanks to its 250 days of sun a year, world-class ski resorts and relatively high home values. But over the last decade, its suburbs have attained a less honorable distinction: they’ve experienced some of the largest increases in suburban poverty rates.

The suburbs surrounding Colorado Springs now have seven Census tracts with 20% or more residents in poverty, according to a report released Thursday by the Brookings Institution. In 2000, it had none. In those neighborhoods, 35% of residents are now considered to be below the poverty line, defined as a family of four making $23,492 or less in 2012.

“We’ve seen this all over the state,” says Kathy Underhill of Hunger Free Colorado, a statewide anti-hunger organization, referring to the growth of suburban poverty. “But I think the American public has been slow to realize this transition from urban poverty to suburban poverty.”

Poverty in the U.S. has worsened in neighborhoods already considered to be poor, but it’s now becoming more prevalent in the nation’s suburbs, according to the Brookings report.

“Poverty has become more regional in scope,” says Elizabeth Kneebone of the Brookings Institution and a co-author of the report. “But at the same time, it’s more concentrated and it’s erased a lot of the progress that we made in the 1990s.”

In the last decade, the number of Census tracts considered “distressed” — in which at least 40% of residents live in poverty — has risen by almost 72%. The number of poor people living in those neighborhoods has grown by an even faster rate—78%—from 3 million to 5.3 million. In 2000, the percentage of poor people who live in economically distressed neighborhoods was 9.1%. Today, it’s 12.2%.

Those areas are leading to what Kneebone calls a “double burden” for impoverished residents—being poor while living in a low-income area that often has failing schools, inadequate healthcare systems and higher crime rates. And as those areas are increasingly located in suburban areas, low-income Americans don’t have the kind of social safety nets often found in urban centers.

The numbers of suburban poor are growing at a more rapid rate than those in urban areas. In 2012, there were 16.5 million Americans living below the poverty line in the suburbs compared with 13.5 million in cities. The number of suburban poor living in distressed neighborhoods grew by 139% since 2000, compared with a 50% jump in cities. Overall, the number of poor living in the suburbs has grown by 65% in the past 14 years—twice as much growth as in urban areas.

It’s easy to pin the growth of concentrated and suburban poverty on the recession, but the spread of poverty throughout the U.S. has broader and more varied explanations. The numbers of suburban poor have been swelled by low-income residents who might once have lived in urban cores, but have been priced out of gentrifying cities, and have moved into affordable housing more prevalent in the suburbs.

Suburban areas also tend to be centered around industries most affected by the economic downturn, like manufacturing and construction, and the jobs that have taken their place are often low-paying, like retail and service positions.

There are also few social programs to help the suburban poor ascend the economic ladder. In the counties surrounding the Denver and Colorado Springs area, for example, many charitable organizations and anti-poverty programs have historically been focused on urban cores and haven’t caught up to changing demographics.

“The charitable infrastructure over the decades have focused on the inner city,” says Underhill of Hunger Free Colorado. “They’ve traditionally not had big case loads and aren’t accustomed to the level of service that’s needed.”

The Brookings report highlights a few suburbs that have seen decreases in poverty, including those around El Paso, Texas; Baton Rouge, La.; and Jackson, Miss. But they were outliers. In North Carolina, three suburban areas—Winston-Salem, Greensboro-High Point, and Charlotte—saw significant increases in both the number of economically distressed neighborhoods and the percentage of poor in those areas. Atlanta now has 197 areas with poverty rates above 20%, up from 32 in 2000.

“Suburban areas are no longer just homes to middle- and upper-income households,” says University of New Hampshire demographer Ken Johnson. “There were always poor suburbs, but much of the outflow of population from urban cores to suburbs has historically been middle- and upper-income. That is less true now.”

Kneebone agrees, saying the perception that suburban areas were some sort of middle-class haven “was always a bit too simplistic.”

“Poverty is touching all kinds of communities,” Kneebone says. “It’s not just over there anymore.”

TIME Economy

U.S. Economy Bounces Back With 4% Growth

A welder works on a project at Prospect Steel, a unit of Lexicon Inc., in Little Rock, Ark., July 25.
A welder works on a project at Prospect Steel, a unit of Lexicon Inc., in Little Rock, Ark., July 25. Danny Johnston—AP

The figures beat market expectations and reversed the declines of a frosty first quarter

U.S. GDP surged by 4% in the second quarter of 2014, beating analysts’ forecasts and more than compensating for the previous quarter’s severe contraction, according to new figures released by the Bureau of Economic Analysis on Wednesday.

Analysts had forecast growth rates ranging between 2 to 3%, but the economy bounced back with stronger-than-expected rebounds in consumer spending, exports, and business inventories. The growth wiped out the declines of the first quarter, when the economy contracted by 2.1%, one of the sharpest declines in 5 years. Now, with the second quarter’s rebound, the economy has grown by 0.9% in the first half of the year.

The growth was led by a rebound in consumer spending, which took a hit in the previous quarter due to severe winter weather. This quarter consumer spending grew by 2.5%, compared with 1.2% in the previous quarter. Durable goods, in particular, surged by 14%.

Exports flipped from a decline of 9.2% in the first quarter to a 9.5% increase in the second quarter.

TIME Foreign Policy

White House: EU, US to Impose New Russia Sanctions

(WASHINGTON) — The United States and European Union plan to impose new sanctions against Russia this week, including penalties targeting key sectors of the Russian economy, the White House said Monday.

The show of Western solidarity comes as the U.S. accuses Russia of ramping up its troop presence on its border with Ukraine and shipping more heavy weaponry to pro-Moscow separatists in eastern Ukrainian cities.

President Barack Obama and the leaders of Britain, Germany, France and Italy discussed the crisis during a rare joint video teleconference on Monday. The discussion follows days of bilateral talks on how to implement tougher sanctions after the downing of a passenger jet in eastern Ukraine, an attack the U.S. says was carried out by the separatists.

The U.S. and European sanctions are likely to target Russia’s energy, arms and financial sectors. The EU is also weighing the prospect of levying penalties on individuals close to Russian President Vladimir Putin, who appears to only be deepening Russia’s role in destabilizing Ukraine.

“It’s precisely because we’ve not yet seen a strategic turn from Putin that we believe it’s absolutely essential to take additional measures, and that’s what the Europeans and the United States intend to do this week,” said Tony Blinken, Obama’s deputy national security adviser.

Europe, which has a stronger trade relationship with Russia than the U.S., has lagged behind Washington with its earlier sanctions package, in part out of concern from leaders that the penalties could have a negative impact on their own economies. But a spokesman for British Prime Minister David Cameron said following Monday’s call that the West agreed that the EU should move a “strong package of sectoral sanctions as swiftly as possible.”

French President Francois Hollande said in a statement that the Western leaders “regretted Russia has not effectively pressured separatists to bring them to negotiate nor taken expected concrete measures to assure control of the Russian-Ukrainian border.”

The U.S. penalties are expected to be imposed after Europe finalizes its next moves. Neither set of penalties is expected to fully cut off Russian economic sectors from the West, an options U.S. officials have said they’re holding in reserve in case Russia launches a full-on military incursion in Ukraine or takes a similarly provocative step.

As the West presses ahead with new sanctions, U.S. officials say Russia is getting more directly involved in the clash between separatists and the Ukrainian government. Blinken said Russia appeared to be using the international attention focused on the downed Malaysia Airlines plane as “cover and distraction” while it moves more heavy weaponry over its border and into Ukraine.

“We’ve seen a significant re-buildup of Russian forces along the border, potentially positioning Russia for a so-called humanitarian or peace-keeping intervention in Ukraine,” Blinken said. “So there’s urgency to arresting this.”

Nearly 300 people were killed when the Malaysian plane was shot down by a missile on July 17. The West blames the separatists for the missile attack and Russia for supplying the rebels with equipment that can take down a plane.

Other leaders participating in Monday’s call were German Chancellor Angela Merkel and Italian Prime Minister Matteo Renzi. The White House said the leaders also discussed the stalled efforts to achieve a cease-fire between Israel and Hamas, the need for Iraq to form a more inclusive government and the uptick in security threats in Libya.

TIME Economy

The Average American Family Is Poorer Than It Was 10 Years Ago

The typical American household is worth a third less than it was in 2003, according to a new study

The typical American household was significantly poorer in 2013 than it was ten years earlier as a result of the Great Recession, a new study shows, an effect that is compounded by growing wealth inequality in the United States.

The net worth of the typical American household in 2003 was $87,992, adjusting for inflation. Ten years later, it was just $56,335, a decline of 36 percent, according to a study by the Russell Sage Foundation.

But even as the average American household’s wealth declined, the net worth of wealthy households increased substantially. The average wealth of the American household in the 95th percentile was $1,192,639 in 2003, and $1,364,834 ten years later, an increase of 14 percent.

The authors of the study said the reason for the disparity was that affluent households were able to ride the success of the surging stock market after the 2008 crash, while middle class families were severely impacted by the decreasing value of their homes.

Wealth declined for everyone in the aftermath of the Great Recession, but better-off families were able to rebound. Households at the bottom of the wealth distribution, on the other hand, lost the largest share of their wealth.

‘The American economy has experienced rising income and wealth inequality for several decades, and there is little evidence that these trends are likely to reverse in the near term,” wrote the authors of the study.

TIME Companies

Walmart’s Head of U.S. Operations Will Step Down After Slump in Sales

A sign lists the current Walmart stock price at a Walmart Supercenter in Bentonville
A sign lists the current Walmart stock price at the Walmart Supercenter in Bentonville, Ark., on June 5, 2014 Rick Wilking — Reuters

His replacement has quickly ascended the ranks of the company's operations in Asia in recent years

Walmart announced on Thursday that Bill Simon, the president of its operations in the U.S., will leave the company next month after four years of leadership marked most recently by a decline in sales. Greg Foran, the New Zealand–born executive who just last month assumed his role as head of Walmart Asia, will take over from Simon from Aug. 9.

“Being asked to lead the Walmart U.S. business is a privilege that I don’t take lightly,” Foran said in a company statement. “I am excited to get started. The needs of our customers are changing dramatically, and we have an enormous opportunity to serve them in new and different ways.”

Foran will assume office at a time of uncertainty for the corporation, with five quarters of falling sales in the rearview mirror despite a recent surge in U.S. consumer confidence. A market analyst told Reuters that Walmart CEO Doug McMillon “wanted new blood” in the company to facilitate its efforts in online retail and general rebranding. Foran has been a rising star in Walmart: he left his position as Woolworths’ head of supermarkets in 2011 to take the reins of Walmart’s fledgling China project and was promoted to oversee the company’s expansion in Asia.

MONEY

Higher Gas Prices Keep Inflation Just Above 2%

Gas nozzle and hose line graph
TS Photography—Getty Images

Inflation steady as pain at pump is offset by slower growth in food costs.

The Consumer Price Index increased 2.1% for the twelve months that ended in June, reports the Bureau of Labor Statistics. This is the second month in a row that the CPI broke 2%.

The index, which estimates overall inflation by measuring price changes in a “basket” of consumer goods, also showed .3% month-over-month growth from May to June of this year. That number is slightly down from May, which saw a .4% month-over-month increase.

Because food and energy prices tend to be volatile, many analysts and economists also look at the “core” consumer price index, which excludes those items, to get a sense of underlying inflation trends. The core CPI rose 1.9% since last June, says the BLS. This increase is roughly on par with last month’s year-over-year core CPI increase, suggesting inflation remains relatively steady.

According to the BLS, the CPI’s increase this month was primary driven by higher gasoline prices. The cost of gasoline rose 3.3% during the month of June and accounted for two-thirds of the entire index’s increase. The price of food, which had jumped in May, rose more slowly in June, increasing by only 0.1%

Investors watch inflation numbers closely because they may offer a clue about when the Federal Reserve may begin to raise key short-term interest rates, which the Fed has held near zero since the 2008 financial crisis. Chair Janet Yellen has said the central bank intends to hold rates down at least until inflation runs at 2%.

But though the closely watched CPI has notched above 2% for the second month in a row, it’s not the inflation number the Fed uses for its 2% target. Instead, it uses a number from the Bureau of Economic Analysis called the personal consumption expenditure, or PCE, deflator. This index covers a broader selection of goods and is also calculated somewhat differently. It also has been running lower than CPI recently—the latest reading was 1.8% for the twelve months ending in May, or 1.5% for the core number excluding food and energy. The BEA will release updated PCE numbers on August 1st.

The CPI typically runs 0.30 to 0.40 percentage points higher than the PCE index, says Mark Zandi, chief economist at Moody’s Analytics, speaking to Money.com on Monday evening before the release.

“The target CPI is 2.3% or 2.4%, somewhere in that range,” said Zandi. If so, today’s numbers suggest the Fed is getting closer to it’s target, but isn’t there yet.

Update: Due to an editing error, the story originally misstated the amount CPI typically runs above the PCE index. It has been corrected.

TIME trade

It’s Time for Europe to Get Tough With Russia

European Union Foreign Ministers Meet On Ukraine Crisis
Flags of the European Union seen in front of the headquarters of the European Commission on March 03, 2014 in Brussels, Belgium. Michael Gottschalk—Photothek/Getty Images

Europe has a history of coming together in good times but not in bad. Think about the creation of the Eurozone, and the launch of the single currency, juxtaposed with the piecemeal policy reaction over the last few years to the Eurozone financial crisis. This tendency has been on tragic display recently, with the shooting down of a Malaysia Airlines jet that carried numerous European passengers. This event should have strengthened European resolve to put more and tougher sanctions on Russia. Instead, it’s led to half-hearted measures doled out on a country-by-country basis. France is even going ahead with big deal to supply warships to Russia.

The key issue, of course, is that Europe is in very deep with the Russians economically, much deeper than the U.S. Or China, for that matter; The recent Russia-China gas deal was small potatoes compared to the business that the Europeans do. Europeans get about 30 percent of their gas from Russia, and are dependent on other natural resources, like oil and minerals, from Russia too. Indeed, the Netherlands, which lost more people than any European country in the crash, took in the largest share of those exports from Russia last year. They aren’t alone—German banks and multinationals do lots of business with Russia, and countries like the UK are a big destination for oligarchs looking to stash cash outside their home country.

That’s why it’s so crucial that European foreign ministers come together at their meeting over the Ukraine situation and Russian sanctions in Brussels. Until they are on board with more serious sanctions, particularly in the energy sector, it’s unlikely that the current rounds are going to make a serious dent in the Russian economy, which, as a recently Capital Economics report pointed out, still has a strong international investment position.

The bottom line is that Europe needs a much smarter and less Russia-centric energy strategy. As I’ve explained before, that’s a need that’s unlikely to filled by the gas rich US anytime soon. Rather it’s something that will have to be driven internally within Europe. It’s an opportunity not only for Europe to become more secure, but to prove to the rest of the world that it can work together and live up to the promise of the EU itself—in both good times and bad.

TIME Economy

New Data Show Faster Job Growth in States With Higher Minimum Wage

Labor Secretary Perez Discusses Raising Minimum Wage During Visit To DC Restaurant
U.S. Labor Secretary Thomas Perez, second left, and Representative George Miller (D-CA) visit a Sweetgreen restaurant to discuss minimum wage, June 16, 2014 at Dupont Circle in Washington, DC. Alex Wong—Getty Images

Findings could undermine the argument that raising the minimum wage hurts job growth

New data show that the 13 states that raised the minimum wage this year are adding jobs at a faster pace than those that did not.

State-by-state hiring data released Friday by the Labor Department reveal that in the 13 states that boosted minimum wages at the beginning of this year, the number of jobs grew an average of 0.85 percent from January to June. The average in the other 37 states was 0.61 percent, the Associated Press reports.

The findings could undermine the argument that raising the minimum wage hurts job growth, a view held by major conservative lobbies. The Congressional Budget Office reported earlier this year that a minimum wage of $10.10 could bring 900,000 people out of of poverty, but would cost 500,000 jobs nationwide.

“It raises serious questions about the claims that a raise in the minimum wage is a jobs disaster,” said John Schmitt, a senior economist at the liberal Center for Economic and Policy Research. The job data “isn’t definitive,” he added, but is “probably a reasonable first cut at what’s going on.”

President Barack Obama has supported raising the minimum wage, saying that it will help the economy and businesses.

Some economists said that data was inconclusive and that it’s too early to say whether minimum wage hikes hurt job growth. The rate of job growth was the highest in North Dakota, where the local oil and gas boom has spurred the economy but there has been no minimum wage increase. “It’s too early to tell,” said Stan Veuger, a scholar at the American Enterprise Institute. “These states are very different along all kinds of dimensions.”

[AP]

TIME housing

4 Charts That Will Totally Ruin Your Saturday

Housing development under construction on farmland, aerial view.
Housing development under construction on farmland, aerial view. Ryan McVay—Getty Images

If you’re waiting to sell your house because you think prices will continue to rise, don’t

fortunelogo-blue
This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published atFortune.com.

The housing recovery that began in 2012 came on almost as quickly and forcefully as the real estate crash that preceded it.

The combination of low interest rates, investor interest, and good, old-fashioned confidence conspired to cause a rapid and vigorous turnaround in home prices after years of tumbling or stagnant home values. But a number of key metrics suggest that the party is over, and any future home price appreciation will be slow and steady from here on out. Here are four charts showing why the housing recovery has ended:

1. Price-to-rent ratios are near their long-term average. Price-to-rent ratios are an important housing indicator that can tell you whether the housing market is overvalued. During the housing bubble, this metric skyrocketed, as speculative fever led people to believe that housing prices would always rise. But the fact that rent rates didn’t rise with purchase prices should have been a warning that the underlying demand for shelter hadn’t increased as much as the demand for owning property as an asset. As you can see, price-to-rent ratios have snuck up above their historical averages, meaning that home values are already a little pricey relative to rents in many markets.

Screen Shot 2014-07-18 at 11.51.55 AM

2. Homeownership rates are also near their long-term average.In the decades leading up to the housing bubble, politicians pushed policies that would increase the homeownership rate. The theory was that homeownership gave people a vested interest in the economy and in their neighborhoods, and that would lead to greater prosperity. But giving out credit to those who didn’t have the wherewithal to afford a home was one factor that led to the failure of the subprime mortgage market. It’s likely, now that policy makers are more aware of the dangers of pushing homeownership, that those rates will remain in the 64% or 65% historical average.

Screen Shot 2014-07-18 at 11.34.22 AM

For the rest of the story, go to Fortune.com.

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