Not your father's recession is right
On Tuesday, President Obama signaled a new economic direction by announcing his appointment of Alan Krueger to chair his Council of Economic Advisors. Krueger’s background is in employment and labor policy, so he will hopefully function as a high-level advocate for bringing down the persistently high levels of unemployment and alleviating our economic malaise. This appointment couldn’t have come soon enough.
Americans continue to suffer from this Great Recession. According to a study released this week by The Conference Board, consumer confidence has hit its lowest level since April 2009. There are many potential reasons for this abysmal statistic: unemployment and underemployment remain at stubbornly high levels, the housing market continues to be a drag on the economy, the recent debt limit fiasco put us on the verge of default, illustrating just how dysfunctional Washington can be, and the subsequent S&P downgrade sent shocks waves through the market. Even the bravest souls who dare to peek at their 401(k) statements are sure to be spooked. And to make matters worse, the U.S. labor market added no new jobs in August, according to a Bureau of Labor Statistics report that was issued this morning.
Dimitri Papadimitriou and Greg Hannsgen of the Levy Economics Institute have recently detailed in a paper titled “Not Your Father’s Recession,” how this recession is far worse than other recessions that we’ve experienced. One key measure they point to is the employment-to-population ratio. From the beginning of the recession in December 2007, this ratio has decreased by 4.6%, from 62.7% to 58.1%. In contrast, in all other recessions since 1973, this ratio never decreased by more than 3% and always rebounded much more quickly. Clearly our current slide over the last 43 months has been deep and long.
The paper goes on to show how post-crisis growth has been 11.9% less than what one would’ve expected based on historical standards of our nation rebounding from recessions. With numbers like these, it’s no wonder why most Americans have a negative outlook.
This recession’s depth and length are unusual. But why?
One reason is that this recession came about as a result of a financial crisis, during which both stock and housing prices collapsed. As a result of all the debt that was accumulated in the process, businesses’ and individuals’ balance sheets were decimated, and they needed time to rebound and productive policies that eased their economic pain. We tried to fix businesses’ balance sheets by giving trillions away to the biggest of the big banks, hoping that this would fix the problem, but it just didn’t work.
We say it’s time for a new approach.
This new approach must put consumers’ interests ahead of corporate interests. We must repair regular American’s individual balance sheets through policies that restore confidence in the real economy.
After Labor Day, President Obama will detail a new jobs plan; he must seize this opportunity to repair the economy where it really matters, on Main Street. To this end, Public Citizen’s President, Robert Weissman, along with over sixty other organizations, has sent an open letter to the president, imploring him to harness this crucial moment and present a plan that is “big, bold, and create[s] jobs directly.” The letter calls for investments in American infrastructure, education, green technology, and healthcare, so that rebuilding the American Dream becomes a reality.
Recovery must not merely be a slogan. We need policies that put us on the right footing. As Papadimitriou and Hannsgen warn, a jobless recovery is really no recovery at all, and unlike our father’s recession, we will only recover if we put American workers and communities first.
Micah Hauptman is the Financial Campaign Coordinator for Public Citizen’s Congress Watch division.