economics: great recession

We have posted a number of times about the unequal effects of the current economic crisis: the worsening of the racial gap in homeownership, the more severely negative economic situation of African Americans and Latinos than of Whites, including among African American and White college graduates, higher unemployment for men than for women (this post also has a lot of info about race, sex, and job loss), the fact that older workers who lose their jobs remain unemployed longer than younger workers, that job losses have been accompanied by increased corporate profits, and that wealthier households have weathered the crisis better than less prosperous ones.

Dmitriy T.M. sent along an April 2011 Gallup poll that asked 1,013 Americans about their perceptions of the economy. Overall, results were more positive than when the same question was asked in September 2008, when the economic meltdown really became apparent. Though more than half of respondents said the U.S. is in either a recession or a depression, that’s down significantly from the 69% who said so in late 2008, while the 27% who said the economy is growing is an enormous jump compared to the mere 3% who thought it was in September 2008:

But perceptions of the economy differed significantly by income level. Nobody thought it was doing great; over half of every income group still thought the economy was in either a recession or a depression. However, those making less than $30,000 a year had a notably more negative outlook on the economy than those with higher incomes. Not only were they more likely to think the economy is doing poorly, but nearly half thought we’re experiencing a depression — twice as high as the proportion of those making $75,000/year who thought so:

Interestingly, perceptions of the economy also varied widely by political affiliation, with Democrats feeling much more positive about the economy than any other group, and Republicans and Tea Party supports feeling markedly more negative:

Meanwhile, the Gallup daily tracker poll on the state of the economy (which only shows overall results) shows a marked downturn in Americans’ perceptions of the economy throughout the summer of 2011, with 77% now reporting the economy is “getting worse”:

For more on the economic crisis and its uneven effects, see Philip Cohen’s post on race and job loss, differences in optimism about the future, unemployment by race/sex/education, occupation, median earnings, and race, and the geography of job loss.

Sangyoub Park, an Assistant Professor at Washburn University, sent in a link to a story by NPR about the racial gap in homeownership rates, a gap that has worsened during the recession. For instance, while over 70% of White households owned their home in 2010, less than half of African American households did:

This graph from the Census Bureau also shows the rate for Hispanics and “all other races” — the only group whose homeownership rate is still significantly higher than it was in the early ’90s. Hispanics are only slightly more likely to own their home than are African American households:

NPR also has a page with interactive maps that show foreclosure rates, unemployment, and median income (though unfortunately it doesn’t break information down by race/ethnicity). You can roll over a county and get the specific data. Here’s the foreclosure information for Clark County, Nevada, home to Las Vegas, me, and, as far as I can tell, the highest proportion of homes in foreclosure in the nation — 1 in 99:

 

Also see our related posts on African American and White job loss during the recession, the growing racial wealth gap, and more on racial differences in the severity of the economic crisis.

Cross-posted at Reports from the Economic Front.

The mainstream media works hard to convince us that Republicans and Democrats are locked in heated battle, with each side advocating dramatically different economic policies.  Although there are differences between the two sides, members of both parties generally share common ground in opposing any fundamental changes to the workings of our economy.

A recent International Monetary Fund report on the U.S. economy sheds light on why this is so.  The report includes the following four color-coded charts which compare economic recoveries (including our current one) according to various criteria (each recovery is along the left; criteria of recovery are along the top; red = weakest recoveries, green = strongest recoveries).

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As you can see from the red boxes in the first chart (the one titled “Real GDP and components”), our last two recoveries have been quite weak compared with previous recoveries in terms of growth in GDP, personal consumption, and investment in nonresidential structures.  This indicates a growing problem with our economic fundamentals.

The red boxes in the second chart (”Households and employment”) indicate that our last two recoveries have also not been kind to working people as measured by the growth in nonfarm payrolls, unemployment, and disposable income.

However, things look quite different in the last two charts. The green boxes in the third chart (”Business sector”) make clear that the last two expansions have generally been good for nonfinancial corporations.  And the dark green boxes in the fourth chart (”Financial”) highlight the enormous gains made by financial corporations in the last two expansions, and especially the current one.

The take-away from these charts is that business leaders experience our recent recoveries very differently than do the great majority of people.  Despite the fact that growing numbers of workers find it hard to distinguish our expansions from our recessions, business profits keep climbing.  And that is what matters to business. Not surprisingly, then, our corporate leaders are lobbying our political leaders hard not to change existing economic arrangements.  If some austerity is needed to maintain stability–so be it.  And, this lobbying has proven successful.

The connection between deteriorating economic and social conditions and high corporate profitability deserves careful study as does the question of whether this is a stable relationship. Regardless, these charts provide important insight into our national policy-making nexus.  As long as our large corporations are prospering we should not expect our political process to produce meaningful change.  The problem isnt a lack of good ideas for how to strengthen our economy and generate jobs, it is the lack of interest on the part of our elected leaders — on both sides of the aisle — to seriously consider them.  It appears that meaningful economic change will have to await either a further unraveling of our economic and social infrastructure or the rise of a powerful social movement with a new economic vision.

The U.S. economy is in trouble and that means trouble for the world economy.

According to a United Nations Conference on Trade and Development report, “Buoyant consumer demand in the United States was the main driver of global economic growth for many years in the run-up to the current global economic crisis.”

Before the crisis, U.S. household consumption accounted for approximately 16 percent of total global output, with imports comprising a significant share and playing a critical role in supporting growth in other countries.

…as a result of global production sharing, United States consumer spending increas[ed] global economic activities in many indirect ways as well (e.g. business investments in countries such as Germany and Japan to produce machinery for export to China and its use there for the manufacture of exports to the United States).

In short, a significant decline in U.S. spending can be expected to have a major impact on world growth, with serious blow-back for the United States.

There are those who argue that things are not so dire, that other countries are capable of stepping up their spending to compensate for any decline in U.S. consumption. However, the evidence suggests otherwise.As the chart below (from the report) reveals, consumption spending in the U.S. is far greater than in any other country; it is greater than Chinese, German, and Japanese consumption combined.

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Moreover, there is little reason to believe that the Chinese, German, or Japanese governments are interested in boosting consumer spending in their respective countries.  All three governments continue to pursue export-led growth strategies that are underpinned by policies designed to suppress wage growth (lower wages = cheaper goods = stronger competitiveness in international markets).  Such policies restrict rather than encourage national consumption because they limit the amount of money people have to spend.

For example, China is the world’s fastest growing major economy and often viewed as a potential alternative growth pole to the United States.  Yet, the Economist reveals that the country’s growth has brought few benefits to the majority of Chinese workers.

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According to the U.S. Bureau of Labor Statistics, despite several years of wage increases, Chinese manufacturing workers still only earn an average of  $1.36 per hour (including all benefits).  In relative terms, Chinese hourly labor compensation is roughly 4 percent of that in the United States.   It even remains considerably below that in Mexico.

Trends in Germany, the other high-flying major economy, are rather similar. As the chart below shows, the share of German GDP going to its workers has been declining for over a decade.  It is now considerably below its 1995 level.  In fact, the German government’s success in driving down German labor costs is one of the main causes of Europe’s current debt problems — other European countries have been unable to match Germany’s cost advantage, leaving them with growing trade deficits and foreign debt (largely owed to German banks).

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The Japanese economy, which remains in stagnation, is definitely unable to play a significant role in supporting world growth.  Moreover, as we see below, much like in the United States, China, and Germany, workers in Japan continue to produce more per hour while suffering real wage declines.

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For a number of years, world growth was sustained by ever greater debt-driven U.S. consumer spending.  That driver now appears exhausted and U.S. political and economic leaders are pushing hard for austerity.  If they get their way, the repercussions will be serious for workers everywhere.

Our goal should not be a return to the unbalanced growth of the past but new, more stable and equitable world-wide patterns of production and consumption.  Achieving that outcome will not be easy, especially since as the United Nations Conference on Trade and Development’s World Investment Report 2011 points out, transnational corporations (including their affiliates) currently account for one-fourth of global GDP.Their affiliates alone produce more than 10 percent of global GDP and one-third of world exports.  And, these figures do not include the activities of many national firms that produce according to terms specified by these transnational corporations.   These dominant firms have a big stake in maintaining existing structures of production and trade regardless of the social costs and they exercise considerable political influence in all the countries in which they operate.

Sangyoub Park let us know that the Bureau of Labor Statistics has released the results of the 2010 American Time Use Survey, a study that looks at what we do with our time. They haven’t released any charts of the 2010 data yet, but the Wall Street Journal posted an article with an image that summarizes the changes since 2007, before the recession began. Not surprisingly, on average Americans are spending less time working and more time sleeping and watching TV, among other activities:

Keep in mind those numbers are daily averages that even out activity that is often not evenly distributed in real life (such as work, where weekly hours worked are averaged across all 7 days).

These changes seem insignificant when you look at them; so what if Americans are, on average, sleeping 5 extra minutes a day, or spending 2 minutes less buying things? But when aggregated across the entire U.S. population aged 15 years or older, these add up to major shifts in family and work life as well as economic activity.

There’s a video to accompany the story:

Finally, they have an interactive website where you can enter your own time use in major categories (to the best you can estimate it) and see how you compare to national averages.

We’ll follow up with more detailed posts once the BLS starts posting relevant charts.

Laura E. sent in a link to the Off the Charts blog by the Center for Budget and Policy Priorities. They posted a set of charts highlighting ongoing unemployment in the U.S. Overall, the private sector has been adding jobs, but at generally very low levels:

But we lost so many jobs relative to the overall working-age population during this recession that the slow job growth simply isn’t enough to significantly alter the unemployment rate, which is still hovering around 9% (though much higher for some groups, particularly young people and racial and ethnic minorities):

The increased labor force participation we saw during the 1990s and 200s have been erased:

The CBPP has a collection of recession-related charts, including this graph of the number of individuals needing a job per each available job opening, a ratio that remains quite discouraging:

In the last few days since the debt ceiling fiasco, a number of economic experts have begun discussing the possibility of a double-dip recession and, as you may have heard, last night Standard & Poor’s downgraded the U.S. debt rating. Overall, it’s not an encouraging picture of our immediate economic future.

Cross-posted at Scientopia.

As demonstrated by some figures posted at Family Inequality, the U.S. birthrate has dropped during the recession:

But the birth rate hasn’t dropped for all American women equally.  Women who’ve already had two children were most likely to skip having a child during this period, and women who already had one child were more likely to delay or end childbearing than women with no children.   But women who already had three children were relatively ready to plow forward with a fourth, even more ready than childless women.

To make an even stronger case that the recession inhibited childbearing, Philip Cohen correlated birth data by state and state unemployment rates (both from the Bureau of Labor Statistics).  His figure shows that “fertility fell more where the recession hit harder”:

Great stuff, as always, from Family Inequality.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

Cross-posted at Family Inequality.

The news each month is usually on unemployment rates, weekly filings of new claims, layoffs and new hiring. And the Pew report on widening race/ethnic wealth gaps was eye-opening. But you can take the measure of the recession overall maybe best with the employment rates — how many people have jobs? By that measure, the news is flat-to-down without letup. The Black-White discrepancy in the trends is increasing.

Here is the employment trend for White and Black women, showing that Black women had higher employment rates before the recession, but they’ve fallen more than twice as much as White women’s (a drop of 5.7% versus 2.4% as of June):

Source: Bureau of Labor Statistics data.

For men, the gap is bigger and the lines further apart, so I added a ratio line to help show the gap. Black men’s rate has fallen 5.6%, compared with 3.8% for White men:

The Christian Science Monitor has an article reviewing some of the factors that contribute to the unemployment gap for men, including education, incarceration and discrimination. And the Center for American Progress has more detail in this report, which argues that declines in manufacturing and public employment are increasing the Black-White gaps especially in this recession.

What the broader statistics don’t show as well is the tenuousness of the jobs Black workers have compared to Whites generally — working for weaker firms, in more segregated jobs, as a result of a racialized sorting process, which put them at higher risk of job loss in a recession (even without discrimination in firing decisions, which there is, too).