Partly because the city had just begun to recovery from Hurricane Katrina when the Great Recession began, it suffered less job loss relative to its pre-recession state and GDP actually grew 3.9% between 2008 and 2011. No other southern metropolitan area cracked 2% in the same period.
Charles Davidson, writing for EconSouth, offers the following evidence of New Orleans’ resilience in the face of the Great Recession. Chart 1 shows that it lost a smaller percentage of its jobs than the U.S. as a whole.
This is even more significant as it looks, as New Orleans had been in economic decline for decades before Katrina. Davidson reports that “the economy in New Orleans has reversed decades of decline and outperformed the nation and other southern metropolitan areas. Consider: the job growth in New Orleans shown in Chart 2 may not look impressive, but compare it to the extraordinary declines of its neighbors.
Thanks to greater diversification of its economy, record tourism, and rising investment money, the city may be setting itself up for a revival.
If the well-being of our children is an indicator of the health of our society we definitely should be concerned. Almost one-fourth of all children in the U.S. live in poverty.
The Annie E. Casey Foundation publishes an annual data book on the status of American children. Here are a few key quotes from 2014 (all data refer to children 18 and under, unless otherwise specified):
Nationally, 23 percent of children (16.4 million) lived in poor families in 2012, up from 19 percent in 2005 (13.4 million), representing an increase of 3 million more children in poverty.
In 2012, three in 10 children (23.1 million) lived in families where no parent had full-time, year-round employment. Since 2008, the number of such children climbed by 2.9 million.
Across the nation, 38 percent of children (27.8 million) lived in households with a high housing cost burden in 2012, compared with 37 percent in 2005 (27.4 million).
As alarming as these statistics are, they hide the terrible and continuing weight of racism. Emily Badger, writing in the Washington Post, produced the following charts based on tables from the data book.
Children live in poverty because they live in families in poverty. Sadly, despite the fact that we have been in a so-called economic expansion since 2009, most working people continue to struggle. The Los Angeles Timesreported that “four out of 10 American households were straining financially five years after the Great Recession — many struggling with tight credit, education debt and retirement issues, according to a new Federal Reserve survey of consumers.”
According to a June 2014 Russell Sage Foundation report, the average U.S. household experienced a real wealth decline of more than one-third over the 10 years ending in 2013.
Table 1 shows that the net worth of the median household fell from $87,992 in 2003 to $56,335 in 2013, for a decline of 36%. In fact, the last ten years were hard on the overwhelming majority of American households. Only the top 2 groups enjoyed wealth gains over the period. Also noteworthy is the tiny net worth of households below the median.
Figure 1 provides a longer term perspective on wealth movements. We can see that most households enjoyed growing wealth from 1984 to the 2007 crisis, with wealth falling across the board since. However, the median household is now significantly poorer than it was in 1984. Only the richer households managed to maintain most of their earlier gains in wealth.
These trends highlight the fact that we have a growing inequality of wealth, as well as of income, and they are not likely to reverse on their own.
Last week CNN triumphantly reported that the job market has recovered to its 2008 peak. Here’s the headline:
Not so fast, though.
Sociologist Philip Cohen observes that the real news is hidden in the fourth paragraph. There the author of the piece acknowledges that the job data are numbers, not proportions. The numbers have bounced back but, because of the addition of almost 12 million people to the U.S. population, the percent of Americans who have jobs or are in school remains lower than it was in 2008.
Given population growth over the last four years, the economy still needs more jobs to truly return to a healthy place. How many more? A whopping 7 million, calculates Heidi Shierholz, an economist with the Economic Policy Institute.
Using the Bureau of Labor Statistics, Cohen offers us a clearer look at where we’re at:
At Pew Social Trends, Gretchen Livingston has a new report on fathers staying at home with their kids. They define stay at home fathers as any father ages 18-69 living with his children who did not work for pay in the previous year (regardless of marital status or the employment status of others in the household). That produces this trend:
At least for the 1990s and early-2000s recessions, the figure very nicely shows spikes upward of stay-at-home dads during recessions, followed by declines that don’t wipe out the whole gain — we don’t know what will happen in the current decline as men’s employment rates rise.
In Pew’s numbers 21% of the stay at home fathers report their reason for being out of the labor force was caring for their home and family; 23% couldn’t find work, 35% couldn’t work because of health problems, and 22% were in school or retired.
It is reasonable to call a father staying at home with his kids a stay at home father, regardless of his reason. We never needed stay at home mothers to pass some motive-based criteria before we defined them as staying at home. And yet there is a tendency (not evidenced in this report) to read into this a bigger change in gender dynamics than there is. The Census Bureau has for years calculated a much more rigid definition that only applied to married parents of kids under 15: those out of the labor force all year, whose spouse was in the labor force all year, and who specified their reason as taking care of home and family. You can think of this as the hardcore stay at home parents, the ones who do it long term, and have a carework motivation for doing it. When you do it that way, stay at home mothers outnumber stay at home fathers 100-to-1.
I updated a figure from an earlier post for Bryce Covert at Think Progress, who wrote a nice piece with a lot of links on the gender division of labor. This shows the percentage of all married-couple families with kids under 15 who have one of the hardcore stay at home parents:
That is a real upward trend for stay at home fathers, but that pattern remains very rare.
In a fancy bit of marketing, U.S. capitalists have been reborn as “job creators.” As such, they were rewarded with lower taxes, weaker labor laws, and relaxed government regulation. However, despite record profits, their job creation performance leaves a lot to be desired.
According to the official data the last U.S. recession began in December 2007 and ended in June 2009. Thus, we have officially been in economic expansion for almost five years. The gains from the expansion should be strong and broad-based enough to ensure real progress for the majority over the course of the business cycle. If not, it’s a sign that we need a change in our basic economic structure. In other words, it would be foolish to work to sustain an economic structure that was incapable of satisfying majority needs even when it was performing well according to its own logic.
A recent study by the National Employment Law Project titled The Low-Wage Recovery provides one indicator that it is time for us to pursue a change. It shows that the current economic expansion is transitioning the U.S. into a low wage economy.
The figure below shows the net private sector job loss by industries classified according to their medium wage from January 2008 to February 2010 and the net private sector job gain using the same classification from March 2010 to March 2014. As we can see, the net job loss in the first period was greatest in high wage industries and the net job creation in the second period was greatest in low wage industries.
As the study explains:
The food services and drinking places, administrative and support services (includes temporary help), and retail trade industries are leading private sector job growth during the recent recovery phase. These industries, which pay relatively low wages, accounted for 39 percent of the private sector employment increase over the past four years.
If the hard times of recession disproportionately eliminate high wage jobs and the “so called” good times of recovery bring primarily low wage jobs, it is time to move beyond our current focus on the business cycle and initiate a critical assessment of the way our economy operates and in whose interest.
I am so pleased to have stumbled across a short excerpt from a talk by Alan Watts, forwarded by a Twitter follower. Watts makes a truly profound argument about what money really is. I’ll summarize it here and you can watch the full three-and-a-half minute video below if you like.
Watts notes that we like to talk about “laws of nature,” or “observed regularities” in the world. In order to observe these regularities, he points out, we have to invent something regular against which to compare nature. Clocks and rulers are these kinds of things.
All this is fine but, all too often, the clocks and the rulers come to seem more real than the nature that is being measured. For example, he says, we might think that the sun is rising because it’s 6AM when, of course, the sun will rise independently of our measures. It’s as if our clocks rule the universe instead of vice versa.
He uses these observations to make a comment about wealth and poverty. Money, he reminds us, isn’t real. It’s an invented measure. A dollar is no different than a minute or an inch. It is used to measure prosperity, but it doesn’t create prosperity any more than 6AM makes the sun rise or a ruler gives things inches.
When there is a crisis — an economic depression or a natural disaster, for example — we may want to fix it, but end up asking ourselves “Where’s the money going to come from?” This is exactly the same mistake that we make, Watts argues, when we think that the sun rises because it’s 6AM. He says:
They think money makes prosperity. It’s the other way around, it’s physical prosperity which has money as a way of measuring it. But people think money has to come from somewhere… and it doesn’t. Money is something we have to invent, like inches.
So, you remember the Great Depression when there was a slump? And what did we have a slump of? Money. There was no less wealth, no less energy, no less raw materials than there were before. But it’s like you came to work on building a house one day and they said, “Sorry, you can’t build this house today, no inches.”
“What do you mean no inches?”
“Just inches! We don’t mean that… we’ve got inches of lumber, yes, we’ve got inches of metal, we’ve even got tape measures, but there’s a slump in inches as such.”
And people are that crazy!
This is backward thinking, he says. It is allowing money to rule things when, in reality, it’s just a measure.
One conventional explanation for our economic problems seems to be that our businesses are strapped for funds. Greater business earnings, it is said, will translate into needed investment, employment, consumption and, finally, sustained economic recovery. Thus, the preferred policy response: provide business with greater regulatory freedom and relief from high taxes and wages.
It is this view that underpins current business and government support for new corporate tax cuts and trade agreements designed to reduce government regulation of business activity, attacks on unions, and opposition to extending unemployment benefits and increasing the minimum wage.
One problem with this story is that businesses are already swimming in money and they haven’t shown the slightest inclination to use their funds for investment or employment.
The first chart below highlights the trend in free cash flow as a percentage of GDP. Free cash flow is one way to represent business profits. More specifically, it is a pretax measure of the money firms have after spending on wages and salaries, depreciation charges, amortization of past loans, and new investment. As you can see that ratio remains at historic highs. In short, business is certainly not short of money.
So what are businesses doing with their funds? The next chart looks at the ratio of net private nonresidential fixed investment to net domestic product (I use “net” rather than “gross” variables in order to focus on investment that goes beyond simply replacing worn out plant and equipment). The ratio makes clear that one reason for the large cash flow is that businesses are not committed to new investment. Indeed quite the opposite is true.
Rather than invest in plant and equipment, businesses are primarily using their funds to repurchase their own stocks in order to boost management earnings and ward off hostile take-overs, pay dividends to stockholders, and accumulate large cash and bond holdings.
Cutting taxes, deregulation, attacking unions and slashing social programs will only intensify these very trends. Time for a new understanding of our problems and a very new response to them.