These work in both directions. Even though major indices are pointing to the end of the recession, some important measures will continue to soften or decline for a while yet before actually improving.
Among these are unemployment, housing values, credit delinquencies, home foreclosures, repossessed autos, consumer confidence, and a return to increased consumption.
Whoa! Those are hefty indicators, you say? And they are lagging? You mean getting worse?
Yep. Let’s take a look.
Unemployment. People who lost their jobs during the recession and are now looking for new jobs will find some new opportunities. But the sobering fact is that wages have been redefined to mirror the current circumstances, and new jobs don’t offer job seekers a true replacement of what they lost. This will affect household income. Crimped during unemployment, it will remain crimped in re-employment.
Underemployment. When workers took available jobs after losing their career job, under-use of previous skills and training caused employers to hire overqualified applicants. Result? Unhappiness at work and restless searching for a better job. With so many pushed out of work, or toward lower paying, lower skilled positions, it will take years for people to juggle themselves into a better place.
Career redefinition. Many people will find their old jobs no longer exist. New technologies or outsourcing may have taken their place. This means the unemployed need to retool their careers. New skills, new industries, new ways of thinking and new educational paths will be needed. These take time to acquire.
Self employment. Many of the unemployed have gone into business for themselves. Initially these people were pushed out by their employer but rehired under contract for their professional, specialized services. However, these small businesses have a high fatality rate, plus the self-employed are responsible for their own taxes, benefits and full enterprise management.
These are formidable obstacles to overcome. If they return to the labor force, they will compete with other job seekers, causing a softer compensation context for employers.
Further, employers have learned how much they saved during the recession with reduced benefits and salaries. They will not quickly restore those expenses unless and until forced to do so by competition.
Consumer confidence. With unemployment and lower prevailing wages, confident consumption does not readily return. In fact, it is safe to assume that the recession taught a lot of people to make do with less, pay down debt and save for a rainy day.’ The depth of this recession scared a lot of people. Those are lessons not soon forgotten. Consumption will not quickly return to former levels.
Housing values. Although it appears that the worst is behind us, there remain a lot of homes on the market that will continue to depress values. Furthermore, until the backlog of homes available on the market begins to decline, pressure will continue to force housing prices down, while sellers become more desperate to sell and get on with purchasing their next home, necessitated by job relocation.
Foreclosures. The economic disruption that forced many people into foreclosure is not easily or quickly undone.
These homes continue to push values lower. People get caught up in this circular horror and it destroys a great deal of their accumulated wealth. They must start over in more ways than one, and will relocate to a cheaper home or rental property, continuing the decline in housing prices and consumer confidence.
Early retirement. This old saw states that old dogs are the last to be rehired. This truth recognizes the higher salaries of more experienced veterans. But younger people bring lower cost and new skills, adapting already to newer technology. Older workers will continue to have difficulty finding re-employment. Many in fact will retire and begin pulling their Social Security benefits. They will more than likely remain retired with small, part-time jobs to add to their meager social security benefits.
Lost IRA and retirement investment values. Many IRAs, 401Ks and other employer-sponsored benefit plans have lost their investment value and have, in fact, dried up. These are no longer available for the older workers to live on in retirement. Whether you are 30, 40, 50 or 60, loss of these programs and their value will retard consumer confidence for many years to come.
Disrupted health insurance coverage. Lost job means lost health coverage, unless you were fortunate enough to find new employment with replacement benefits. Re-coverage, however, usually means a period of non-coverage, or exclusion of pre-existing medical conditions. Millions of Americans have lost valuable coverage in this manner. It is one of the defining problems of the American health care system that needs to be fixed. But that won’t happen anytime soon. Meanwhile, workers will toil without or with incomplete coverage. How confident do you suppose these folks are in their economic futures?
Are you newly depressed by this news? That is not the point of this piece. What I wanted to convey is simple.
There are those who have made the recession worse by heralding the negative and ignoring the positive; there are those who have totally misstated economic facts and events, thus misleading the public but making the recession worse than it needed to be.
These behaviors should be curtailed. But it would be an ongoing disservice if we trumpet the end of the recession when in fact negatives will continue to occur for some time. Those most affected by these negatives will continue to wonder what happened to the recession’s end.
These things take time. Patience and goodwill are needed to survive them. But let’s be realistic. The leading indicators show that the recession may have bottomed out and a return to better times is on the horizon. When that will fully occur is still an open question.
Meanwhile, a lot of cleanup and repair needs doing before we can truly say the recession is over.
