Recession on the loom

[dvcgirl]

As usual, I agree completely with Crisi and Mrs. Pete.

The Great Recession has been 30 years in the making. So much of our economic growth was fueled by cheap credit to the masses and at least for now, that's over. As a nation, we're at 100% debt to GDP, and most economists believe that anything over 90% is not sustainable. And it's going to take quite a long time to pay that down, especially when the government is spending so much to try and keep the economy from tanking again. American households are in worse shape. And while Americans have been paying down their debt, most of the "pay down" is really thanks to defaulting on debt.

The Fed is essentially out of options. There's talk of them lowering effective interest rates again, but that's not the problem. The cost of borrowing is at historic lows. The problem is demand. Those who can borrow money aren't, and those who want to borrow money can't, as restrictions on borrowing have become much tougher.

So much of our growth was thanks to people borrowing money for lifestyle enhancement, and now that those people can no longer borrow....that shaves a lot off of GDP growth.

I honestly thought we might just get by with very slow growth and not officially go back into a recession. But after the August jobs number, and the trend that has developed in the last four months, I think that the chances are very high that by the fourth quarter we'll see a negative GDP number. And then the self fulfilling prophecy kicks in. We don't have a "lay-off" issue anymore. Most companies that we're going to let people go have done so. However, companies simply aren't hiring. They're in limbo....waiting for signs that the economy is improving.

And with this latest jobs number, they did not hear what they want to hear. And so, now they won't hire. And since we need 125K jobs just to stay even and keep new job hunters employed, with these dismal numbers, we'll continue to slide backwards on that front.

We're in this....for awhile. Another 6-7 years.

 

[Princesca]

I agree... even the WH is saying that we're not going to see jobs recover to pre-recession levels until 2017, and I think that's incredibly optimistic.

Another problem with all of this is health care reform. You can say what you want about whether we need it or not, but the overall point is that the timing was incredibly bad. In this climate, we shouldn't be doing ANYthing that increases uncertainty for business, and we've now made it so that companies can't even predict how much it will cost them to hire a new employee, because they can't calculate the new cost of health insurance per new hire. I have heard more than one business state that they're kind of in a holding pattern, waiting to see how that all shakes out. And while they wait, the economy continues to tank.

Add to that stuff like the new EPA ozone restrictions (which thankfully the administration decided to table for now) and you have a problem. Again, it's the timing. We do things backwards in this country. During times of plenty, we should be paying down debt and spending the surplus on investments in the future. For whatever reason, we don't do that, and then we CAN'T do it when we're in a pinch.

But I really do think we should stop talking about government stimulus unless it involves giving money directly to taxpayers. Government has proven time and time again that it cannot "stimulate" without massive amounts of waste. At least if you give most families $5000, say, you know they're either going to bank it, which helps recapitalize banks, use it to pay down debt, which helps recapitalize banks and puts the taxpayer in a better financial situation, reducing their debt load, or they'll buy stuff with it, which stimulates the economy. I almost plotzed when I read this in the Weekly Standard:

"The report was written by the White House’s Council of Economic Advisors, a group of three economists who were all handpicked by Obama, and it chronicles the alleged success of the “stimulus” in adding or saving jobs. The council reports that, using “mainstream estimates of economic multipliers for the effects of fiscal stimulus” (which it describes as a “natural way to estimate the effects of” the legislation), the “stimulus” has added or saved just under 2.4 million jobs — whether private or public — at a cost (to date) of $666 billion. That’s a cost to taxpayers of $278,000 per job.

In other words, the government could simply have cut a $100,000 check to everyone whose employment was allegedly made possible by the “stimulus,” and taxpayers would have come out $427 billion ahead."

The inmates are running the asylum, I'm afraid.

 

[mpls_mm]

Then its off to IOWA we go

That's exactly what we did! We were living in Minneapolis and couldn't afford to start our own business, we slashed our cost of living and have a better quality of life! It was worth the move!

 

[Kay1]

As usual, I agree completely with Crisi and Mrs. Pete.

.

They, and you and I, have been making this sort of post since 2004 or so. I think it helped me to prepare for the inevitable. I only wish I had some idea what happens next.

 

[Oglet]

That's exactly what we did! We were living in Minneapolis and couldn't afford to start our own business, we slashed our cost of living and have a better quality of life! It was worth the move!

Interesting, very interesting indeed. That is a very similar situation to what we are in at the moment.

Granted we would be giving up living next door to WDW but the reduction of stress from the cost of living/wages down here would offset it IMO.

Something to think about.

 

[dvcgirl]

They, and you and I, have been making this sort of post since 2004 or so. I think it helped me to prepare for the inevitable. I only wish I had some idea what happens next.

You're right...we have been posting about the inevitability of this since then. We have so many problems in this country, and this world...it's overwhelming to think about it. We have complete lack of leadership on both sides of the aisle.

I think what happens next is more of the same. High unemployment, slow to no growth. A ton of volatility in the markets. Things are going to be tough for awhile. This time *is* different thought. This time, if and when we do begin to really grow again as a nation.....a big swath of the population will be left behind.

 

[crusoe2]

You're right...we have been posting about the inevitability of this since then. We have so many problems in this country, and this world...it's overwhelming to think about it. We have complete lack of leadership on both sides of the aisle.

I think what happens next is more of the same. High unemployment, slow to no growth. A ton of volatility in the markets. Things are going to be tough for awhile. This time *is* different thought. This time, if and when we do begin to really grow again as a nation.....a big swath of the population will be left behind.

I've been following the threads on this topic for several years and am always especially interested to hear what you and Kay1 and Mrs.Pete and some of the others have to say on this. You guys seem to have a very sensible attitude as opposed to screaming that the sky is falling. I've been reading opinions and information from lots of sources and there's a lot of the "sky is falling" stuff out there. I have faith in the average American and think we'll pull thru this eventually. But I do think we're in for a "new normal" as some have said. So you peaked my curiosity with your comment that you think a big portion of the population will be left behind if and when our economy recovers. Could you elaborate on that a little? I'm just curious to see if you're thinking what I'm thinking.

 

[dvcgirl]

I've been following the threads on this topic for several years and am always especially interested to hear what you and Kay1 and Mrs.Pete and some of the others have to say on this. You guys seem to have a very sensible attitude as opposed to screaming that the sky is falling. I've been reading opinions and information from lots of sources and there's a lot of the "sky is falling" stuff out there. I have faith in the average American and think we'll pull thru this eventually. But I do think we're in for a "new normal" as some have said. So you peaked my curiosity with your comment that you think a big portion of the population will be left behind if and when our economy recovers. Could you elaborate on that a little? I'm just curious to see if you're thinking what I'm thinking.

I think that a lot of Americans are going to experience a significant downsizing in their standard of living. Many Americans experienced a jump in lifestyle thanks to cheap and readily available credit for many, many years. Whether they got that credit via a simple credit card, or pulled it out of their inflated home equity, those days are over for quite awhile.

This same group of people are also more likely to see their wages decrease, as many of them were able to earn a decent (if not great) living by working in the manufacturing, construction and public sector jobs (think municipalities). Many of these folks have only a high school education. As someone else already pointed out....the unemployment rate for college educated Americans is much, much lower than it is for everyone else. When employment does pick up, for many of these people, they will end up in lower paying jobs in either retail or the service sector.

We're seeing the middle class disappear before our eyes. I don't think that the world is ending. But I think that things are going to be tougher. People are going to have to work harder, and for a longer period of time. This is going to put a permanent strain on the employment numbers. There simply aren't going to be enough jobs for everyone as the baby boomers are going to fight to keep the jobs that were supposed to go to the college graduates. The boomers are woefully unprepared for retirement. If the boomers can't keep their full-time jobs, they'll try to cobble together a series of part-time lower paying jobs.....keeping pressure on teenage unemployment (which is at 25%).

As that problem mounts, who knows, we see a period of unrest as our youth sees less opportunity and a nation that has squandered their future (unfunded entitlement programs and insane government spending). There's a lot of this going on in Europe right now, and we may have a period of it as well.

But when I really begin to think how bad things can get, I try and imagine living in the 1930s, when things were incredibly dismal. It must have felt like things never would get better....and yet they did. I know that our population and restraints on growth are much bigger now than then...but I don't think we'll stay in the soup forever. But we will be living in this "new normal"....with a smaller middle class and higher unemployment.

 

[blondietink]

This same group of people are also more likely to see their wages decrease, as many of them were able to earn a decent (if not great) living by working in the manufacturing, construction and public sector jobs (think municipalities). Many of these folks have only a high school education. As someone else already pointed out....the unemployment rate for college educated Americans is much, much lower than it is for everyone else. When employment does pick up, for many of these people, they will end up in lower paying jobs in either retail or the service sector.

QUOTE]
Most of the jobs where I live are only minimum wge jobs. For a college educated person like me, in addition to being over 50, I am very tired of being overlooked for hiring because I am over-qualified ( and old, although nobody will come right out and asy it). the other few jobs here that are not minimum wage, require a masters or doctorate degree. So, should I waste another 2 years of my life getting a masters degree in the hopes that I can find a job that pays more than minimum wage? Or will those jobs be gone too in a couple of years? How do I fund getting a higher degree if there are no jobs to pay off a student loan? And how much will I make when I eventually get a job if I have to pay for a higher degree when I will reach retirement age in a few years? At the local Labor Deptartment office, they love to tell of the woman who they (we, the taxpayers) sent to college to get her BS degree and the only jobs she is being offered are $8.00/hr secretarial jobs. What kind of a return on investment is that when we, the taxpayers paid $40,000 for her education?

We live very frugally already. House is paid off. We never go out to eat. I have always done home canning in the summer and fall months. We have pay as you go cell phones. I sew lots of clothes. We heat the house with wood and don't even own an air conditioner. We drive used cars. Yep, this is the American Dream, all right.

 

[Oglet]

They, and you and I, have been making this sort of post since 2004 or so. I think it helped me to prepare for the inevitable. I only wish I had some idea what happens next.

I am very concerned with how this is going to handle the middle to lower class people. Families who are already living on the edge, people who struggle to keep a roof over their head, electric on and a working car to get back and forward to work.

I fear we are going to see a massive explosion of homeless people/families in this country.

 

[OceanAnnie]

Most of the jobs where I live are only minimum wge jobs. For a college educated person like me, in addition to being over 50, I am very tired of being overlooked for hiring because I am over-qualified ( and old, although nobody will come right out and asy it). the other few jobs here that are not minimum wage, require a masters or doctorate degree. So, should I waste another 2 years of my life getting a masters degree in the hopes that I can find a job that pays more than minimum wage? Or will those jobs be gone too in a couple of years? How do I fund getting a higher degree if there are no jobs to pay off a student loan? And how much will I make when I eventually get a job if I have to pay for a higher degree when I will reach retirement age in a few years? At the local Labor Deptartment office, they love to tell of the woman who they (we, the taxpayers) sent to college to get her BS degree and the only jobs she is being offered are $8.00/hr secretarial jobs. What kind of a return on investment is that when we, the taxpayers paid $40,000 for her education?

We live very frugally already. House is paid off. We never go out to eat. I have always done home canning in the summer and fall months. We have pay as you go cell phones. I sew lots of clothes. We heat the house with wood and don't even own an air conditioner. We drive used cars. Yep, this is the American Dream, all right.

I'm sorry for what you are going through. You aren't alone. I think you raise some important points, in regards to uncertainty in regards to this economy.

 

[MrsPete]

The Fed is essentially out of options. There's talk of them lowering effective interest rates again, but that's not the problem. The cost of borrowing is at historic lows. The problem is demand. Those who can borrow money aren't, and those who want to borrow money
years.

The federal government is only making things worse. They cannot improve the economy by altering interest rates, minimum wage, etc. I don't think the white house is as oblivious as they appear to be . . . Instead, I think they just won't say the truth because it's political suicide and we're nearing another election.

 

[dvcgirl]

This same group of people are also more likely to see their wages decrease, as many of them were able to earn a decent (if not great) living by working in the manufacturing, construction and public sector jobs (think municipalities). Many of these folks have only a high school education. As someone else already pointed out....the unemployment rate for college educated Americans is much, much lower than it is for everyone else. When employment does pick up, for many of these people, they will end up in lower paying jobs in either retail or the service sector.

QUOTE]
Most of the jobs where I live are only minimum wge jobs. For a college educated person like me, in addition to being over 50, I am very tired of being overlooked for hiring because I am over-qualified ( and old, although nobody will come right out and asy it). the other few jobs here that are not minimum wage, require a masters or doctorate degree. So, should I waste another 2 years of my life getting a masters degree in the hopes that I can find a job that pays more than minimum wage? Or will those jobs be gone too in a couple of years? How do I fund getting a higher degree if there are no jobs to pay off a student loan? And how much will I make when I eventually get a job if I have to pay for a higher degree when I will reach retirement age in a few years? At the local Labor Deptartment office, they love to tell of the woman who they (we, the taxpayers) sent to college to get her BS degree and the only jobs she is being offered are $8.00/hr secretarial jobs. What kind of a return on investment is that when we, the taxpayers paid $40,000 for her education?

We live very frugally already. House is paid off. We never go out to eat. I have always done home canning in the summer and fall months. We have pay as you go cell phones. I sew lots of clothes. We heat the house with wood and don't even own an air conditioner. We drive used cars. Yep, this is the American Dream, all right.

I'm really sorry you're going through this. I can't tell you how many articles I've read about people in their 50s....many educated like yourself, who are having a really tough time out there. I wonder if there are any stats on that age-group....people in the 50s and 60s.

I'm worried about my next-door neighbor. She's got her associates degree only, but about 22 years ago got a job as a government contractor. 22 years later, she's making 80K + as a human resources employee. Her job ends on September 15th. She's 57 and needs to work another 8 years minimum. And I'm worried for her...that she's going to have a really, really tough time coming anywhere close to that salary in that field right now.

I hope things improve for you soon!

 

[MrsPete]

I am very concerned with how this is going to handle the middle to lower class people. Families who are already living on the edge, people who struggle to keep a roof over their head, electric on and a working car to get back and forward to work.

I fear we are going to see a massive explosion of homeless people/families in this country.

What did people do in the past? They lived with family, they grew their own food, they saved for small luxuries, they walked from place to place, they cooked at home, and they did without.

I think people are going to have to go back to those frugal lifestyles. For many people, the idea of a nuclear family living in it's own house is no longer going to be feasible.

 

[crusoe2]

dvcgirl, I believe we are thinking along the same lines. I have a son in college and I teach high school - special needs students. I've cautioned all of them - my child and the ones I teach - that they may have to adjust their expectations for what life will be like after they finish school. I especially worry about my students because these are kids are who highly unlikely to be able to go to college. I tell them all the time that they should learn any trade they can - things like plumbing, carpentry, electrical work - so that they'll be more likely to find work. I emphasize learning skills that the community can't live without. Even so, I'm afraid many of them are going to find that they can't have the life they're expecting - getting their own cars and their own place, living independently. I'm afraid that's going to be part of the "new normal." It's already happening to some extent. We live in a town with a reputable university. I grew up here and atttended college locally. But very few of the students from my graduating class did so - most went away to larger schools. Now we're seeing more and more of the local kids stay home to attend college. Many who initially went off to school have come home to finish here because living away from home just proved to be too expensive. It makes me wonder how much longer it will be before it becomes common for young married couples to live with his or her parents for awhile before they get a place of their own. This was still fairly common here when my parents got married in the early 60's but people my age wouldn't have dreamed of doing that. I think these are the sort of measures that will be necessary to get by tho.

 

[MrsPete]

I'm really sorry you're going through this. I can't tell you how many articles I've read about people in their 50s....many educated like yourself, who are having a really tough time out there. I wonder if there are any stats on that age-group....people in the 50s and 60s.

I'm worried about my next-door neighbor. She's got her associates degree only, but about 22 years ago got a job as a government contractor. 22 years later, she's making 80K + as a human resources employee. Her job ends on September 15th. She's 57 and needs to work another 8 years minimum. And I'm worried for her...that she's going to have a really, really tough time coming anywhere close to that salary in that field right now.

I hope things improve for you soon!

Yes, like the auto workers, she's not likely to find work at that same pay again.

But I think I feel worse for the young people coming out of school. At least your neighbor had some years of big paychecks, and hopefully she put aside some money. Kids just starting out don't have that cushion.

 

[crusoe2]

What did people do in the past? They lived with family, they grew their own food, they saved for small luxuries, they walked from place to place, they cooked at home, and they did without.

I think people are going to have to go back to those frugal lifestyles. For many people, the idea of a nuclear family living in it's own house is no longer going to be feasible.

Wow, apparently we were posting at the same time Mrs. Pete. I've actually been warning my son that this is what he should expect. He already attends the local university so that he can live at home while he gets his degree. I've told him that his living situation may not change after graduating tho.

 

[MrsPete]

Now we're seeing more and more of the local kids stay home to attend college. Many who initially went off to school have come home to finish here because living away from home just proved to be too expensive. It makes me wonder how much longer it will be before it becomes common for young married couples to live with his or her parents for awhile before they get a place of their own. This was still fairly common here when my parents got married in the early 60's but people my age wouldn't have dreamed of doing that. I think these are the sort of measures that will be necessary to get by tho.

Yes, I've seen students start at a far-off university, then come home after a year to attend our local school. It seems that most kids are living on school loans these days, and that's hard to justify.

When my grandparents were married, they lived in a rented room and cooked on a hot plate for two years. Then later her father came to live with them. That 's going to become life again. It's practical: elderly aren 't alone, parents don't need to pay day care.

 

[dvcgirl]

What did people do in the past? They lived with family, they grew their own food, they saved for small luxuries, they walked from place to place, they cooked at home, and they did without.

I think people are going to have to go back to those frugal lifestyles. For many people, the idea of a nuclear family living in it's own house is no longer going to be feasible.

I think that this is already happening to some degree. A lot of 20-somethings and even young families have had to move back in with family, meaning the parents. And while I know that it's not always the easiest thing....it's far from the way the billions of people in third world countries live. They get by on about $2 a day.

And I think of my FIL, who was one of six kids, grew up in a two bedroom apartment in Jersey City....and speaks so fondly of his childhood. I think he was lucky if he got socks and an orange for christmas.

Honestly, there are times when I would enjoy a much simpler life where we all don't have to work so incredibly hard.

In the end, all we can to save as much as we can while still enjoying life.

 

[Colleen27]

When my grandparents were married, they lived in a rented room and cooked on a hot plate for two years. Then later her father came to live with them. That 's going to become life again. It's practical: elderly aren 't alone, parents don't need to pay day care.

I'm not sure how practical it is now, with the way the boomers are postponing retirement. None of my kids' grandparents were retired during our daycare years, even with my mom & MIL both retiring earlier than they initially planned, and by the time they did retire neither one was in any shape to care for babies/toddlers/preschoolers all day, every day anyway.

An aging parent providing childcare worked just fine a couple-few generations ago when retirement and pension came after 30 years with the same company and careers started at a relatively young age. Now, though, with retirement income depending on stock market returns for most people and career being such a fluid thing that changes so many times over a lifetime, I don't think most Boomers or younger generations are able to retire at a young enough age to help their children with childcare.