These days, whenever I meet someone for the first time and the find out that I’m an economist on the side, the next thing they always say is, “so, how log do you think this recession will last?” And my standard answer is, “five to seven years.” They’re usually shocked.
TV and radio is littered with commentators talking about the recession bottoming out, and turning the corner. The Dow and S&P are back up again, banks are giving back some of their bailout money, and talk of this being an “L” shaped recession have given way to people now calling it a “V” shaped one. Aside from a few scowling faces, such as Nouriel Roubini and Peter Shiff, the Darth Vader and Dick Cheney respectively of economics, the rest of the world seems more than ready to start partying again.
Except for one thing. Everything is coming back to life except jobs and they’re not going to come back until forever. And for an old fashioned guy from the Midwest, if your jobs are in the toilet, your economy is in the toilet. It has always seemed to me you should begin the definition of a recession with jobs and poverty and you should end it with that. If people are poor and out of work then you are in a recession, no matter how good Wall Street is performing this morning.
Look at the numbers. The Labor Department’s jobless reports came out yesterday and they’re just plain ugly. The number of people who are receiving jobless benefits rose from about 6.5 million to nearly 6.7 million. That isn’t a huge leap, but it is the highest we have ever had and longest running since they started keeping records on it, back in 1967. New jobless claims dipped just slightly, but that’s just the calm before the storm. Chrysler and GM are about to close a truckload of plants and that will create tens of thousands of unemployed people, from the factories to the suppliers, to the sellers on the lot. That’s going to be deep and grim.
That’s why I say five to seven years. It’s going to be a long slog and it’s going to be painful. Tens of thousands of families will be out of work and out of their homes for a very long time. Couples will break up fighting over money. Kids will feel like they have to take sides. Bread “winners” will feel humiliated at their new status. More families will lose their homes. Some will move in with in-laws and friends causing even more tension and hurt. Homeless shelters will be full. Churches, many of which are barely surviving themselves, are going to feel compelled to give more and more money to keep the food pantry filled and the local shelter funded. And you can bet your pet cat that for the vast majority of them, if and when they return to some kind of employment it won’t have the same pay and benefits that it had before.
Nor should they. The bubble created on Wall Street was a mirage, buying and selling on fake value of money that didn’t exist, all the while creating the appearance of value while never actually creating anything. But the rest of us bit our share of the same apple. The rate of consumption and destruction that the U.S. was on (and actually is still on) was on a collision course with rapidly approaching scarcity. According to Anup Shaw, who crunched World Bank numbers for his blog, Global Issues, we who live in the top ten percent of income brackets for the earth consume upwards to sixty percent of all of the resources. Think about that the next time we complain that some poor housecleaner in Tegucigalpa, Honduras has five children. Truth is, my one child will use up and destroy more resources over his or her lifetime than three families of five in Honduras. The problem isn’t them, it’s us.
So, what happens in five to seven years? What ought to happen is that we will return to something lower than “normal.” Perhaps in the current parlance, we should say that we should return to a “new normal.” A normal in which we consume less and enjoy it more. That’s the way our grand parents (or parents, depending on how old you are) learned to treat the Great Depression. That’s the good news, and perhaps this recession will teach us some of those values again. But the bad news is that many, many, many, many people actually died of disease and hunger in the Depression. Not something often talked about, but nonetheless true. Why can’t we ever be a people that learns the important lessons of life without first causing screeching horror and pain upon our weakest and most vulnerable populations?