How the US Economy, Americans Fared in 2011

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How the US Economy, Americans Fared in 2011

December 29, 2011 [PBS NewsHour]

RAY SUAREZ: One of the main issues of the election season under way is the sluggish state of the economy. Things are not nearly as bleak as they were at the depths of the recession, but, for many Americans, it’s going to be a long road back to financial health and to the kind of prospects they once believed they had.

NewsHour economics correspondent Paul Solman saw this extensively in his coverage of the past year, part of his reporting on Making Sense of financial news.

PAUL SOLMAN: Foreclosed homes leveled.

GUS FRANGOS, Cuyahoga Land Bank: In the next several years, it’s probably going to be about 20, 30,000 more like this in the county.

PAUL SOLMAN: The unemployed queued up at job fairs for work that rarely materialized.

WOMAN: I’m here because I’m looking for a job, like everyone else.

MAN: It’s very difficult. It’s very difficult.

PAUL SOLMAN: People with jobs, like security guard Bobby Hicks, treading water.

BOBBY HICKS, security guard: I am the most insecure security officer you will meet, because I’m worried. Right now, I live paycheck to paycheck. I want better for my daughter, all right? But, I mean, she realizes that, hey, daddy can’t get it for her.

PAUL SOLMAN: A melancholy medley of sound bites on the economics beat, including a single mother of three earning $34,000 a year, Cookie Sheers, who struck a chord we heard all year.

COOKIE SHEERS, single mother: We all feel stuck in a rut. You feel like you can’t move, you can’t grow, like you’re just at that edge of water where you can come up for air every few minutes, but never long enough to feel that you’ve accomplished something. You always have to go back down.

PAUL SOLMAN: It wasn’t all doom and demolition, something like a million-and-a-half jobs added in the past year, real, if very modest, economic growth, corporate profits, robust, but, for so many people, despair, home prices down yet again, with six million Americans more than a month late on their mortgages, two million more in foreclosure this year.

In Cleveland, Ohio, this house was worth $94,000 in 2005. This summer, it was a tear-down, just to save the neighborhood. Gus Frangos was running the county’s land bank.

GUS FRANGOS: Naturally, we don’t want to be just demolishing stuff forever, but before you can stabilize something, you have to stop the hemorrhaging. And so we have to bury the dead.

PAUL SOLMAN: A major reason so many homes have been abandoned: continued unemployment, so much of it long-term. Nearly six million Americans have been jobless for at least six months, nearly 30 million, according to our own monthly reckoning, wanting work or working part-time, but looking for more.

And that total includes more and more indebted college grads, like Evan Melillo, just north of Cape Cod, a history major who graduated with $40,000 in student loans.

EVAN MELILLO, college graduate: I went on Craigslist and I looked up every tutoring, assistant teacher. I think I applied to a driving school. And, so far, I got two emails back.

PAUL SOLMAN: Total student debt at year’s end topped the total owed on credit cards at more than a trillion dollars, and helped trigger the Occupy Wall Street movement.

TIMOTHY GRANTHAM, protester: You know, I went to school and a lot of these people went to school. And now that we’re out for the summer or out completely, there’s no jobs. We can’t pay them — we can’t pay those student loans back. And all we keep hearing from the creditors is we’re lazy. We’re not doing our part.

PAUL SOLMAN: The main message of the so-called 99 percent was, of course, economic inequality. And the year’s economics coverage began and ended on that note.

Last winter, long before Zuccotti Park, Denise Barrant, a middle manager whose suburban Boston home is in foreclosure and has been out of work for more than two years, sounded the theme.

DENISE BARRANT: The top 1 percent is living well, and they don’t get it. They don’t get what is happening to this country. And I feel like we’re creating a Third World country subculture within this country.

PAUL SOLMAN: Not everyone agrees, of course. And, admittedly, we were, for the most part, chronicling the downside.

But, after 2010, in which more interviewees cried on camera than in my entire 34-year career in public television, frankly, 2011 didn’t seem a whole lot better.

RAY SUAREZ: Joblessness and the loss of so much personal wealth is also leading to a higher poverty rate in America. Fifteen percent of all Americans fell below the federal poverty line, just over $22,000 for a family of four, a little more than $11,000 for an individual.

We take a closer look now at the impact of this slow recovery, not just in 2011 and 2012, but beyond, with Don Peck. He’s been writing extensively about these issues for The Atlantic. He’s the author of “Pinched: How the Great Recession Has Narrowed Our Futures and What We Can Do About It.” Annette Lareau is a professor of sociology at the University of Pennsylvania and author of the book “Unequal Childhoods.” And Terry Savage is a nationally syndicated personal finance columnist for The New York Times.

Well, I’ve lived through, you’ve lived through multiple cycles of recession and recovery. Is this one different, Don Peck, likely to have a longer-lasting effect on living standards?

DON PECK, The Atlantic: I think it almost certainly is.

We tend to think of recessions as entirely temporary, jobs go away, jobs come back, savings go down, and we rebuild them. That’s true to a large extent, but especially deep and long recessions, such as we had in the 1930s, in the 1890s, to an extent in the 1970s, these do tend to have much longer-lasting effects, at least on some people, young people who are first finding their way into the job market, whose entire career paths are really greatly influenced by their start and the first few years they experience, and particularly, I think, for the unemployed themselves.

You know, the average duration of unemployment is over nine months today. There are millions of people who’ve been out of work for six months, a year, two years, three years. And temporary unemployment does become permanent after a time.

Even once the economy begins to recover, I really fear that people who have been out of work for two or three years or more will have real trouble finding their way back into jobs without substantial help.

That’s a problem that Europe had in the 1980s and 1990s. It’s not a problem that the U.S. has had on a widespread basis in a long time, but I fear it’s a problem that’s coming.

RAY SUAREZ: Terry Savage, various — and I’m sorry. I reassigned you from your newspaper, The Chicago Sun-Times, to another Times.

TERRY SAVAGE, The Chicago Sun-Times: Yes. Thanks, Ray.


RAY SUAREZ: But we will forget about that.

Scholars were saying that it was already getting harder to move up the ladder in the United States before the great recession began. Is it going to be tougher to break even, are many American families, in fact, never going to break even, once even a more solid recovery takes hold?

TERRY SAVAGE: Oh, Ray, I would never have such a negative outlook. It just depends on which ladder you are talking about.

You know, we have come through some really tough times before. The people who were caught in them obviously feel the pain, whether it was the ’30s, or think about the 1970s, when we really had a stagnant economy and the seniors and savers were decimated by inflation.

But in every one of those circumstances, when we came out of, say, the ’70s recession, few remember that, in 1980, the prime rate was 21 percent, Paul Volcker clamping down on inflation. The Dow was under 800. Unemployment was over 12 percent. If I had stood there that day and said to you, well, 20 years from now, the Dow will be over 10,000, unemployment will be low, we will be having a great boom, everybody will have a home, the people would have yanked me off the camera.

The fact is, we never know what next positive uptrend will come. No one predicted the technology revolution that created so many new jobs. America has been through these cycles before. Early in our history, the frontier closed. Oh, my goodness, it was the end of America. Or the Agrarian Revolution, we didn’t need farmers on the land, or the Industrial Revolution.

We change. And the question now is not whether we should validate what’s going on. Obviously, there’s tremendous pain. The question is, what is the way out and up? Is it to create a stagnant economy? We have had years and years of both Republican and Democratic governments spending trillions of dollars and proving they could get us not very far. Or is there another way to create the growth and the opportunity that will lift more Americans back into work?

RAY SUAREZ: Well, you have heard from Don and Terry, Professor Lareau, two views of the same landscape. Do you see a long tale, a long shadow, especially for working-class and poor families in this country, with whom you’ve been spending a lot of time?

ANNETTE LAREAU, University of Pennsylvania: I do, because I think other research has shown that poverty is harmful for children. And it does cast a long shadow into adulthood.

So, if we compare children who grew up poor, especially children under the age of 5, and compare them with comparable children, they — even many years later, into their 30s, research has shown they earn less money, they have less education, they have poorer health. Men are much more likely to be incarcerated.

And so there really is quite a long shadow. And that’s because, in research I have done for my book “Unequal Childhoods,” we followed parents around with children. And children are very sensitive to their parents’ moods. And children are very aware when their parents are unemployed or under economic strain.

RAY SUAREZ: But what are the practical differences? Do they make different life choices? Do they make different conclusions about themselves and their trajectory in this country?

ANNETTE LAREAU: No, many children and young adults are very hopeful. They want to do better and they think that they will do better.

But if we line them up compared to children whose parents earned just even a little bit more, those children whose parents earned a little bit more, they have higher levels of education, they work more hours in the labor market, they have better jobs as adults. And so that makes a huge difference in life chances.

RAY SUAREZ: Terry, it’s undeniable that the country has come back in the past from recessions. But were they similar in the way they erased wealth from balance sheets?


RAY SUAREZ: Hispanic families in this country lost 67 percent of their net wealth over the last five years. So, before they even get back to where they were five years ago, they first have to build back from that enormous loss.

TERRY SAVAGE: Yeah, but that’s what America does best.

I mean, I think the Americans of my father’s generation who grew up in the ’30s, for example, would be very appalled to hear that they wouldn’t have the opportunities. They were the ones coming out of World War II, even though they lived in childhoods that were affected by the economy, deeply affected, that built America’s industrial power in the ’50s and ’60s.

I don’t think that having a childhood that is deprived, and you see the pain of unemployment around you, is necessarily a negative. I think that generation grew up and understood that they should pay off their mortgages and not get into debt.

It’s we, the baby boomers, who grew up in relative prosperity, who went on in many cases to take on debt and not recognize the dangers of it. So, I think today’s children will grow up with a much better sense of the importance of work, the importance of investing, the importance of saving.

And, on the contrary to what Annette said, I think we are building the base for the next level of economic growth with a much more knowledgeable group of Americans who are coming into the work force in the days ahead.

RAY SUAREZ: Knowledgeable, chastened, John Peck — Don Peck?

DON PECK: Look, we will recover from this period. I certainly agree with Terry about that.

And not every longstanding consequence of this period will be negative. I mean, I’m certainly seeing a turning towards thrift among young people today. If this period is like past periods like this one, that may endure. And that will make young people more resilient probably for the rest of their lives.

But we can’t ignore the very real long-term negative consequence that this period is having for many millions of Americans. There is substantial academic research that shows that people in their 20s who come out on to a recessionary job market, a bad job market and who struggle in bad jobs or no jobs for several years not only start out behind; they never fully catch up.

As to the unemployed, again, every year that goes by where there is high unemployment and little job availability harms the unemployed more and more. And over time, the natural rate of unemployment can rise for a period of many years thereafter. The economic term for this is hysteresis.

Again, it’s something that has affected Europe in recent decades. We haven’t had to deal with this yet. I think this distinction is very important because, as we consider recovery from this period, as we consider the aggressiveness of government action that we should demand, it’s important to recognize that the longer we stew in this period, the more long-term damage we are doing. And I think people often underweight that long-term damage in the moment.

RAY SUAREZ: So, treading water, Don Peck says, is harmful. It’s not that you are just staying in one place. It actually hurts you once you start moving again.

ANNETTE LAREAU: It does, especially for young people.

I mean, University of Pennsylvania is an elite school. It’s in the Ivy League. My students are anxious. But they are — they will probably do better than children of the working class. Many jobs, to get into the job, you need an internship, and middle-class parents are able to support and subsidize their children in ways working-class parents aren’t.

But people are worried. And we see many consequences of that, including marital conflict in the home. And to go back to one point Terry said, the U.S. position in the world economy is different than it was after World War II, when the kinds of jobs that are being created are very different.

RAY SUAREZ: Terry Savage, do you think what we saw last year and the year before with Occupy, and before that with the Tea Party, is an outgrowth of the kind of anxiety people feel about the debt overhang, the long-term, big-scale fiscal picture with the United States government and its finances?

TERRY SAVAGE: Absolutely.

Who wouldn’t be anxious when you take a look at the politicians, both sides of the aisle in Washington who are faced with this incredibly important — the decisions they make today about how to get America growing again, and who can’t even vote on a two-month extension of something we have already?

Not that it’s the right thing to rob Social Security now, but the fact is that they can’t get together and come up with creative solutions to grow our economy, instead of borrowing money and throwing it at problems that don’t seem to get solved.

That’s the greatest anxiety of all. I think that’s what is creating Occupy Wall Street and the Tea Party. And that is what we need to see going on. We’re going to have some big decisions in Washington in the next couple of months. And we’re going to have another debt ceiling decision. We’re going to have the U.S. postal system, which is going to have to be rescued by the taxpayers once again.

We have the entire economic picture going forward in the hands of this Congress. And that’s going to have a big impact on the electorate this summer, I’m sure.

RAY SUAREZ: Terry Savage in Chicago, Don Peck and Annette Lareau here with me in Washington, thank you all.