Despite optimism-mongering in the media and in certain quarters of Washington and elsewhere, we’ve had indication after indication in the economic data that whatever lousy progress has been made in nudging up GDP, American workers have not benefited from it. But now we know from the horse’s mouth, so to speak: they’re mired in a tough new reality that is in many ways getting worse.
“Deeply pessimistic” is the term used in the sobering survey, “Diminished Lives and Futures: A Portrait of America in the Great-Recession Era.” A confirmation of bits and pieces of economic data that has been trickling in over the years on this topic.
Just today, for example, the Bureau of Labor Statistics reported that wages adjusted for inflation had continued their morose decline: in 2012, by 0.4% after having already declined 0.5% in 2011. It doesn’t seem much. With nominal wages rising, workers might temporarily be fooled into thinking that they’re moving ahead. But enough of those declines, and pretty soon you’re talking about some real money.
They compound the lingering impact of the financial crisis. “Five years of economic misery have profoundly diminished Americans’ confidence in the economy and their outlook for the next generation,” conclude the authors of the survey. And yet, since 2007, Congress borrowed $8 trillion, nearly doubling the US gross national debt to $16.48 trillion, and the Fed printed another $2.1 trillion, all under the unholy pretext of wanting to stimulate the economy.
The survey draws a dire picture of the employment situation: 23% of the respondents had been laid off during the past four years. Of them, 10% spent more than two years looking for a job before they found one, and 22% still haven’t found one. While the economy has created jobs over the last few years, it has done so at a rate that barely kept up with the growth of the labor force.
If that: in the 2013 survey, 58% of the respondents had a job, down from the 2010 survey, when 60% had a job. The lower income categories were hardest hit. Only 38% of those normally earning under $30,000 had jobs, while 71% of those over $60,000 had jobs.
Where has all the money gone that the government borrowed and spent, and that the Fed printed? To China, Brazil, Mexico, into commodities, wars, farmland, into every conceivable financial asset, creating bubbles here and there, including the most gigantic credit bubble ever. Some people around the world have become immensely rich. And others, who’d already been immensely rich but had gotten a haircut during the financial crisis, were bailed out. Good for them. But it just hasn’t created a lot of jobs in the US.
That’s the good news. The bad news: a stunning 54% of those who’d been laid off and were lucky enough to find a job, now make less money than before. Less money in nominal terms, not even adjusted for inflation. A third of them got whacked by a pay cut of 11% to 30%. Another third reported that their pay had been slashed by over 30%. Ouch!
This new reality—finally finding a job but at much lower pay, or hanging on to a job but with a cut in pay—has sucked optimism out of the system. “Not only does the public not see signs of economic recovery now, they don’t see it in the near future either,” finds the report. And 32% of the people expect it to get even worse. A worrisome deterioration from 2010, when only 27% expected it to get worse.
Full recovery anytime soon? Only 12% expect it in the “near future”; 25% expect it to take 6-10 years, and 29% think that the economy will “never” fully recover. Mainstream-media optimism hasn’t quite sunk in yet, apparently.
They put their pessimistic finger where it hurts: GDP doesn’t measure anything but spending as a whole and is useless for individuals. Per-capita GDP, while still inadequate, would be a better measure. Alas, it’s well below the pre-recession peak, and thus silenced to death.
So, 60% of the people believe that there is a “new normal,” a tough new reality where workers have to take jobs below their skill level, at lower pay, and with less job security—because they’re lucky to even find a job.
To survive in this new normal, workers raided their savings. Even after all these years since the recession officially ended, 38% have “a lot less” money in savings than they had before, 18% have “a little less.” But the piggy bank is hard to refill as workers earn less, while prices continue to rise—thanks to the “bold” and “courageous” actions by the Fed.
“The Great Recession’s scope and impact was so widespread and corrosive that it will likely affect individuals, families, and the nation for many years to come,” the report concludes. On the other hand, after a drunken deficit-spending frenzy by Congress that left behind a mountain of new debt, and after a delirious money-printing orgy by the Fed that left behind a debased dollar, our hapless American workers are now also saddled with banks that are too big to fail, and it turns out, “too big to jail.”
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.