Scrimping and Saving
WHY YOU SHOULD CARE
Because though we might be seeing the light at the end of the recession tunnel, there are some lessons we’ve learned along the way — and they’re worth remembering.
By OZY Editors
Second homes. That’s where it’s at during tough times. At the end of 2013, home values roared back from the deepest slump in recorded history. Homebuilders are gearing up for an unprecedented boom after the worst housing-start drought since WWII. And banks are flush from mortgage lending fueled by the lowest rates ever offered. And one of the best bargains out there might just be vacation-home and secondary-home markets, which tend to lag behind the rest of the market. Are you listening? That means: buy, buy, buy.
Things are looking up, but plenty of Americans are still jobless. We lost 8.5 million jobs in the Great Recession and haven’t recovered 1.5 million of them. There’s always been a lag between the technical growth of the economy or gross domestic product (GDP) and an improvement in the jobs situation. But over the last 40 years, that lag time has gotten longer — much longer. In the 1950s, following a recession it generally took six months after GDP picked up again for companies to start hiring in earnest. By the early 1990s recession, that lag was 15 months. And nowadays, that lag could be as long as 60 months. But why is the American economy producing an average of only 180,000 jobs a month instead of the 300,000-400,000 we need?
Americans are working for themselves in ever-greater numbers. There were about 22.5 million nonemployers, or self-employed Americans, accounting for just under $1 trillion in sales in 2011. And 17.1 is the percentage of U.S. employees who were self-employed in 2011. How to put that into context? In terms of the business universe, it’s a lot of people generating a small amount of money. In 2011 the self-employed represented 17.1 percent of all employees in the United States, up from 14.3 percent in 2003.
What matters most in understanding a recession? OZY’s interview with Obama’s former chief economic adviser Austan Goolsbee revealed something important about what he saw behind the scenes. Here’s some of what he had to say: ”The thing that’s different about a depression is that recessions kind of heal themselves. There are natural forces such that as the recession goes on, the pent-up demand builds up, and then it kind of comes back. When you destroy the financial system, it doesn’t come back. You go down and you stay down. And that’s basically what happened in the Great Depression. … You saw we had terrible unemployment. You saw how we lost seven, eight, nine hundred thousand jobs a month. So the month of January 2009, the decline of GDP and the job losses from just that one 31-day period — that was as big as a normal recession. To lose 850,000 jobs in a recession — that’s about a medium-size recession. But that was just a 30-day recession.”
- OZY Editors, OZY AuthorContact OZY Editors