Recession

The latest batch of data released by the Census Bureau provides a new perspective on the impacts of the Great Recession. The overall trend lines look continue to look particularly poor for families up and down the economic ladder. In the aggregate, income is down and poverty is up.

For the average family, income declined 2.3% in real terms over the last year. We can no longer say that wages are stagnant because, in fact, they are going down. And it’s getting worse for those at the bottom. The official poverty rate in 2010 topped 15%, up from 14.3 last year and the fourth consecutive year where the rate increased. Last year, 46.2 million people were classified as poor, an increase of 2.6 million people.

We’ve had other recessions in the last fifty years but the impacts of this one, which was supposed to have officially ended in 2009, is turning out to be especially severe. Compared to ten other recessions since the late 1940s, income declines and poverty increases have never been as pronounced in the subsequent year as this time around. There’s little evidence around right now that the economy is on a sustained path toward recovery. Instead, we are gathering more and more data which points to extended economic hardship for families across the country.

It’s frustrating to digest this information but not see any concerted policy action designed to reverse these trends. Meanwhile, the evidence mounts that our society is no longer providing the type of opportunities we have come to expect as Americans. It feels like entire cohorts are being left to fend for themselves.

The rising child poverty numbers are simply tragic; this rate rose last year to 22%. The social costs of this level of child poverty will not be felt today, they will rise substantially over time. A credible estimate is that we should expect child poverty to cost the economy almost $500 billion a year in lost productivity, increased health expenditures, and other factors.

Another set of people we should be particularly concerned about is young adults. They had the worst decline in income as a demographic group, lowering their income 9.3% over the previous year. To cope with dimming economic prospects, young adults have been forced to double-up with other family members. The official definition of a “doubled-up” household is one that includes at least one “additional” adult, who is older than 18 and not enrolled in school but is not the householder, spouse, or “cohabiting partner.”

Over the course of the recession, the number and share of doubled-up households has increased dramatically, rising over 25% among young adults. Last year, 14.2 percent of people ages 25 to 34 lived with their parents, up two percentage points since the start of the recession. Most are not counted as poor, but if their own income status were considered, over 45% would have incomes below the poverty threshold. On top of that, we can infer that many of the doubled up are also saddled with rising levels of student loan debt. It’s been pretty tough out there for recent college grads.

Now, we certainly can celebrate the ingenuity of families who come together in tough times, but we need to recognize the hole being dug for the demographic cohorts we traditionally count on to invigorate our economy.

Incomes certainly need to go up, along with job opportunities. That is a fundamental precondition for future prosperity. But to forge new pathways toward economic security, millions of families need to rebuild their balance sheets. They must be able to build up a stock of assets that they can access in times of need or as strategic investments. This underscores the necessity of responding to this recession (and these rising poverty numbers) by crafting a complementary set of policies that promote savings and asset building over the long term.

In putting forth his jobs program, President Obama faced a difficult dilemma: propose a program that could gain Republican support or a more ambitious program that would actually get the economy back on a path of recovery and job creation.

The country is facing a serious debt crisis that threatens to undermine our economic recovery. No, not that one. American households are carrying around $11.4 trillion of debt.

In today's Huffington Post, Bruce Jentleson, a policy wonk, and Jay Pelosky, a seasoned global investor, argue that the public and private sectors in the United States must cooperate if the country is to "revitalize domestically and compete globally."

If you're like most Americans, the America you want is cold weather, blond singing icons, and a robust welfare state. No, wait, scratch that. While there may be varying degrees to which any of that is true, there is more uniformity in the desire to have the Swedish distribution of wealth.

The American economy can produce decent jobs. We know this to be true because it has happened before. Getting back to a decent-jobs economy will require a commitment on the part of policymakers to creating many more middle-skill, middle-wage jobs. While there are important reasons to support the incomes of those at the bottom of the wage distribution, we will not improve the lives of working families without improving and increasing job opportunities in the middle.

The economic environment in America today is more dire than most of us have ever known. We are in the midst of an unemployment emergency, in essence a jobless recovery: notwithstanding recent marginal upticks in official U.S. jobs numbers, there will be no fundamental improvement in the unemployment picture unless major new national economic strategy initiatives are taken. Who will step up to drive them forward?

The global economy is suffering from severe shortage of demand. In developed economies that shortfall is explicit in high unemployment rates and large output gaps. In emerging market economies it is implicit in their reliance on export-led growth. In part this shortfall reflects the lingering disruptive effects of the financial crisis and Great Recession, but it also reflects globalization’s undermining of the income generation process. One mechanism that can help rebuild this process is a global minimum wage system. That does not mean imposing U.S.

This is by far the most jobless of recent recoveries. Allen Sinai, a man known for describing numbers carefully, already wrote in November 2009:

“Never has business shed so many workers so fast, so many people failed to find work who are looking for work, and so many dropped out of the labor force as in the current circumstance.”

By that time, the stock market was already recovering but payrolls were not. Sinai wrote:

Unemployment over nine percent, the highest rate this far into a “recovery” in modern times, reflects only the surface of our problems. More troubling is that over six million American have been unemployed for more than six months, the largest number since the Census began tracking their numbers. The pool of “missing workers” – those neither employed nor counted as unemployed – has soared to over 4.4 million, according to the left-of-center Economic Policy Institute.