It's the end of the recession as we know it. Why don't we feel fine?
So why don't we feel better? For too many of us, it feels like nothing has changed. The sunniest estimates predict unemployment staying over 9% for the next year, and many experts fear it could rise above 10% before it drops. And underemployment accounts for a further 8%. That means 17% of Americans are either out of work or doing jobs far beneath their training level. No wonder things don't feel normal yet.
Definition vs. Reality
Part of the disconnect comes from the distance between the textbook definition of a recession and the harsh emotional reality of one. Crises make people change behavior, sometimes permanently; many Great Depression survivors made thrift a lifelong practice that they passed on to their kids. In 1959, 18 years after the Depression ended, the average personal savings rate was 8%, which rose to more than 12% by the early 1980s.
By the beginning of 2008, the personal savings rate had slumped to a dismal 0.8%, but with unemployment on the rise and the economic outlook more grim, that rate has shot up above 4%, its highest level in a decade. Even if the unemployment problem resolved itself tomorrow, it will still take years for consumer confidence to recover its robust 2007 levels.
Of course, the government can also instill economic confidence. In the Great Depression, economic catastrophe led to a raft of government initiatives that vastly changed the face of business. The Glass-Steagall Act of 1933 created the Federal Deposit Insurance Corp. -- the existence of which kept 1930s-style runs on the banks from plaguing the 2008 recession. Glass-Steagall also established strict boundaries between commercial and investment banking -- and the law's repeal in 1999 helped lay the groundwork for this recession.
Another factor that improves consumer confidence: having a steady job. One positive outgrowth of the Great Depression was a raft of programs that put people back to work. The New Deal programs -- the Public Works Administration, the Tennessee Valley Authority, even the Federal Theater Project -- offered a popular and prominent government intervention plan to about 60% of the unemployed in the Depression.
"A Good Crisis"
White House Chief of Staff Rahm Emmanuel's admonition to "Never let a good crisis go to waste" may sound mercenary, but many of President Obama's supporters hoped that the new administration would follow in the footsteps of President Franklin D. Roosevelt and quickly put people to work. Given the country's crumbling infrastructure, underfunded schools, and need for a renewed communications grid, it was clear that the rapidly rising unemployment rate provided the perfect opportunity to address a host of problems.
Unfortunately, the Obama administration's most visible initiatives have directly benefited business and industry, only tangentially assisting the average taxpayer. The president and Congress have moved to extend unemployment benefits, but this is only a short-term fix, unsatisfying to workers searching for meaningful jobs. Even the best-known initiative to directly help consumers, the CCARD Act, is taking nine months to go into effect -- and credit-card companies are keeping busy during that lag-time, raising rates and finding loopholes.
Has Anything Changed?
And therein lies the worst part of the problem. When Wall Street's profligate banks were begging for bailouts and firing employees, it felt as if the pain of the recession was hitting all parts of the socioeconomic spectrum. Tales of Dick Fuld getting punched, John Thain getting sacked, and Bernie Madoff getting imprisoned warmed many a chilled heart as unemployment loomed.
But with unemployment higher than ever, the news that the recession is "over" proves that nothing has really changed. The Wall Street honchos we blamed for dragging the country into this mess are presumably reaping the benefits of the 3.5 percent annualized growth, while millions are trying to scrape together enough spare change to pay COBRA and facing the unwelcome proposition of selling a beloved home in a soft market.
In this context, the end of the recession carries the sulfurous whiff of promises broken, opportunities lost, and benefits distributed unequally. It feels like a crisis that has very much gone to waste.