Updates from the Economy

In September the National Bureau of Economic Research notified us that the economic recession in the US was over. The actual economy apparently wasn’t listening. The unemployment numbers haven’t changed. Businesses are still closing, and bankruptcies are still being filed. Cities and states are still making tough choices.

Lake Oswego, OR is pondering tough choices:

The committee recommended closing three of the district’s nine elementary schools and moving all sixth graders into the district’s two junior high schools. Those would then become middle schools.

In Pennsylvania:

West Pharmaceutical Services Inc. said it will lay off 170 workers and close its plant in Montgomery, Pa., that makes molded plastic components such as stoppers and vials for injectable drugs.

In Wisconsin:

NewPage Corp., the operator of the former Stora Enso North America paper mills in Wisconsin, said Wednesday that it will close its mill in Whiting at the end of February 2011, affecting 360 employees.

In Beltsville, MD:

Baxter International Inc. will close its Beltsville production facility, cutting 106 jobs effective Dec. 15.

The Deerfield, Ill.-based bioscience giant decided in late 2009 to transfer to European facilities the local production of a meningitis vaccine that’s sold internationally, said spokeswoman Deborah Spak.

In Ohio:

Worthington Precision Metals, a Mentor manufacturer of parts for hydraulic steeling and other automotive components, has closed its doors.

Representatives from the company on Wednesday directed all questions about the matter to its attorney, Seth Briskin, who confirmed the closure. The company, at 8229 Tyler Blvd., has been around since 1946, according to its website.

There’s more:

“It’s like any lender situation that’s happening every day. When your lender forecloses, that’s what happens.”

Worthington had about 90 jobs. The employees were informed of the news about 2 p.m. Wednesday. (Dec. 8 )

In Florida:

WESTOVER — A tomato packing business that has long been the center of the village of Westover will close in early February.

About 103 full-time workers at the Custom Pak facility will lose their jobs as part of a company consolidation plan, state officials confirmed Wednesday.

The non-recession is even affecting gun manufacturers. In New Hampshire:

ROCHESTER — Springfield, Mass-based Smith & Wesson Holding Corp is relocating its Thompson/Center Arms operations from Rochester, N.H., to its Springfield, Mass. facility, according to the City biz Real Estate website.

and

The closure will effect approximately 250 employees, some who may be offered the opportunity to move the company’s Springfield operation.

In Maine:

Congresswoman Chellie Pingree’s office says a firearm manufacturing company is shutting down its operations in Windham next year.

Bushmaster Firearms International, which employs 73 people, will be closing its doors on March 31. The company is owned by Freedom Group.

I keep hearing we’re in an economic recovery, but after reading all these stories, that’s hard to believe.

The reason it’s hard to believe is because it’s not true. Check out the video available through this link from truthout. The video is a short analysis from Richard Wolff, an economics professor, who has a PhD in economics from Yale, as well as degrees from Harvard and Stanford. Dr. Wolff puts the alleged recovery into perspective. There’s a long, long road ahead – unless you’re a banker or a Wall Street exec.

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“Anxiety Lingers” is One Way of Putting It

On my way to work today, I saw a Washington Post headline: Recession is officially over, but anxiety lingers.

To be fair, the Post article offers a few reasons that might be the case, but Atrios gets right to the point:

So the recession was over in June ’09. Huzzah!

I know I’m a broken record on this, but there is no great mystery why the Dems are looking at potentially major problems in November. The economy is truly atrocious and has been for a long time. I remember just before the ’08 election – almost two years ago – betting a friend that unemployment would rise above 7.6%. At the time to many people 7.6% seemed to be a pretty crazy number, even in the middle of the unfolding crisis. Soon after the administration projected that unemployment would peak at 9% from Q1-Q3 2010, and then start declining without any stimulus. It’s now been above 9% since May 2009, including 3 months where it was 10%+. If I had traveled back in time to warn them of this state of affairs, they would have been more likely to believe the time travel part.

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The Decline: The Geography of a Recession

This shows the progression of unemployment over the last decade – a frightening video by LaToya Egwuekwe. Remember, this does not include the underemployed or those who have given up.

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55%

Chart: Pew Research Center

The graph pretty much speaks for itself, but a very quick explanation for those who are not visually inclined:

Since the recession began 30 months ago, more than half of all adults in the workforce—55 percent—say that they have either been unemployed, taken a pay cut, had their work hours reduced or have become involuntary part-time workers, according to a new survey by the Pew Research Center’s Social and Demographic Trends Project.

Full report here.

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Bearing Witness

Hope House, a shelter for victims of domestic violence answers question about the economy and family violence on their blog:

Does the bad economy cause domestic violence? The answer is “no”. However, it doesn’t help in situations where there is already abuse present. Economic stresses often lead to more frequent and more violent abuse when domestic violence is already present. It also creates more barriers to a woman’s ability to flee the situation.

Domestic violence is three times as likely to occur when couples are experiencing high levels of financial strain as when they are experiencing low levels of financial strain.

Women whose male partners experience two or more periods of unemployment over a 5-year study were almost three times as likely to be victims of intimate violence as were women whose partners were in stable jobs.

Three out of four domestic violence shelters report an increase in women seeking assistance from abuse since September 2008

Shelters across the country have been dealing with budget cuts for the last several years, even as the need for services increases.

HuffPo:

The NY Times reports that, in New York’s recession-year court backlog, “Cases involving charges like assault by family members were up 18 percent statewide.” Philadelphia in 2009 saw a 67% increase in domestic homicides:

The increase in domestic violence in Philadelphia is mirrored nationally, and experts say it is linked, in part, to the recession. In fact, data indicate that domestic violence had been falling in the 15 years before the recession took hold last year.

From Philly Short Sale 411:

In 2 separate instances, Philadelphia residents committed suicide this month after their homes had been sold at Philadelphia County Sheriff’s Mortgage Foreclosure Sale. The first case occured March 5th when Lynda Clark, a resident at 1833 S. Newkirk Street, in South Philadelphia, was found by Sheriff’s Deputies while posting notice that ejectment proceedings where underway. The second case occured on March 22nd when Gregory Bellows of 4320 Mitchell shot himself when Sheriff’s Deputies arrived enforce a Writ of Possession.

PhillyShortSale411.com has investigated both cases. We started this investigation today with the hope that we would be able to find some great inspirational lesson that would be helpful to other people facing foreclosure or maybe to agents who do short sales everyday. When that wasn’t working out we thought maybe we could figure out what we could have done to help these people. Unfortunately, all we found is 2 examples of people who lost hope and didn’t see a way out.

It is easy to see why these people might feel hopeless. The woman, living alone, with no family, can’t find a job. she could sell and walk away with a few thousand bucks but then where does she go? The man living for years off the equity in his house, again no family, no income, no credit, where is he going to live. He could do a Short Sale but where does he go from there?

Recession based murder suicides are occurring:

In Houston:

Homicide investigators say a northwest Houston home under foreclosure apparently led the struggling residents to take their own lives.

Police arrived at approximately 11 p.m. Sunday to the home on Arncliffe Drive near Antoine Drive and found a married couple shot to death. The couple left notes that indicated the shootings were suicides and a result of financial difficulties including the foreclosure of their home.

Investigators say the couple were found on their bed with the suicide notes alongside of them.

In California:

ANTIOCH — A man fatally shot his wife, then took his own life early Thursday following marital and financial problems, police said.

A recent Gallup Poll took a look at how the long term unemployed are faring. Predictably, they found that worry, sadness, stress, and depression increase for those who are unemployed for 6 months or more. The bottom line from their findings:

These findings suggest that emotional wellbeing deteriorates with length of unemployment, and even those unemployed for less than a month are not immune from the stressors of joblessness. However, it is important to note that the data do not prove causality and that other explanations could exist. For example, individuals who experience lower emotional wellbeing may be more likely to become unemployed or to have difficulty finding new employment. Still, as unemployment drags on and optimism for finding a job in the near future declines, being without a job appears to be taking an emotional toll on unemployed individuals.

Hopelessness is hard to handle, as the fishermen of the Gulf are finding:

Catholic Charities reported this week that of the 9,800 people the counselors had approached since May 1 in Orleans, St. Bernard and Plaquemines Parishes, 1,593 were referred for counseling because of signs of depression.

“It’s the fear of losing everything,” said Representative Anh Cao, a Republican from New Orleans who has assembled a response team to travel along the Gulf Coast to assess constituents’ needs.

Mr. Cao said he had met two fishermen in Plaquemines Parish who told him they were contemplating suicide. While those cases are “extreme,” Mr. Cao said, they reflect how some people “are approaching a point of despair.”

and

Researchers who studied the aftermath of the 1989 Exxon Valdez spill said coastal residents of Alaska saw a higher incidence of suicide, divorce, domestic violence and substance abuse. To this day, many are still dealing with the effects of the environmental damage, economic losses and lawsuits.

I realize this is not uplifting information. It’s grim, depressing stuff. As one of the long term unemployed, I’ve experienced the same feelings of despair and desperation.

Since these stories are not being widely covered, it’s important to bear witness to what is happening to the people who are being hurt by the recession/depression, and the failure of our leaders to respond correctly and creatively to it.

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The Invisible Boomers

People aged 80 and older have statistically had the highest suicide rate in the US. Since 2006, according to the Centers for Disease Control, those statistics are changing:

The most recent figures released, from 2007, reveal that the 45-to-54 age group had a suicide rate of 17.6 per every 100,000 people. The second highest was the 75-to-84 age range, with a rate of 16.4, followed by those between 35 and 44, with a 16.3.

The rate for 45- to 54-year-olds in 2006 was 17.2 per 100,000 people, and in 2005 it was 16.3.

“It’s such a startling rise,” said Dr. Paula Clayton, the medical director of the American Foundation for Suicide Prevention.

Researchers are puzzled by the increase, but Dr. Clayton said the rise in suicide among Americans born in the 1950s and 1960s was probably a result of a combination of factors, including easier access to guns and prescription drugs and what may be a higher incidence of depression among baby boomers.

Dr. Clayton seems to be skirting what may well be the real cause of this increase in boomer suicides:

In hindsight, the suicide numbers look like a warning sign about the coming collapse of the economy, suggesting that many people in their prime working years were already feeling the economic stress of what would become an epidemic of foreclosures and job losses before those losses actually started showing up on anyone’s radar screen. The middle-age suicide rate jumped first in 2006, at the peak of the housing bubble…

There are safety nets for the young and the elderly. There are none for the middle aged. A middle aged person who loses their job and becomes one of the long term unemployed will also be likely to lose their home, their savings, and their credit. Marriages falter in these situations.

Sadly, this is not new information. The folks in this age group may as well be invisible, for all the interest there is in doing anything to help them.

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The Kids Really Aren’t Alright

I already know that I’ll be yelling at the TV early next week when C-SPAN2 carries the Senate debate on the unemployment extension bill, and on an amendment to restore COBRA health insurance aid for jobless workers. That’s because I’m certain that Republican multi-millionaire Senators such as Lamar Alexander (R-Tenn) and John McCain (R-Ariz), he of seven eight houses, will be whining about how we can’t afford to help the families of America’s unemployed millions because of the “burdens” it will place on Alexander’s and McCain’s “children and grandchildren.”

You can bet that their children and grandchildren are all pretty well set with nice trust funds and whatnot, thank you very much. How nice it must be for the upper crust to be so insulated from the impact of the Great Recession.

But what about the rest of us? What about our children and grandchildren?

From The Hechinger Report:

More children will live in poverty this year. More will have two parents who are unemployed. Fewer children will enroll in pre-kindergarten programs, and fewer teenagers will find jobs. More children are likely to commit suicide, be overweight and be victimized by crime. This is all according to a report released today by the Foundation for Child Development that measures the impact of the recession on the current generation.

These are the children of the Great Recession, a cohort that will experience a decline in fortunes that erases 30 years of social progress. The report – known as the Child and Youth Well-Being Index – predicts that in the next few years, the economy may recover and the unemployment rate may drop, but the generation growing up now could feel the harsh impact of the recession for years to come.

“These are the lasting impacts of extreme recessions,” said Kenneth Land, a professor of sociology and demography at Duke University and author of the report.

The current report predicts that the number of children living in poverty will rise to 15.6 million in 2010, an increase of more than 3 million children in four years. More than a quarter of American children will live in families where both parents don’t have full-time jobs, up from 22 percent in 2006. As many as half a million children could become homeless, up from 330,000 in 2007.

The decline in overall child well-being in the U.S. comes after several years of improvement driven largely by declining rates of crime, drinking and drug use, according to the report, which includes data from the U.S. Census, Centers for Disease Control and Prevention, and the National Center for Education Statistics. The percentage of children living in poverty had also been dropping relatively steadily until 2000, when it began ticking upward.

That’s when the Republicans gained control of the White House and Congress.

Already, U.S. students trail their peers in many developed countries on most measures of child well-being. American children were last or close to last in terms of poverty, parental employment, safety, health and family relationships compared to 20 other developed nations, according to a 2007 UNICEF report. They were also close to the bottom in educational achievement.

And then came the Great Recession. Right now, school districts across the country are cutting back, and perhaps the programs hardest-hit are in early childhood education.

Schools will be hit particularly hard by the aftershocks, said Land. As more families enter the ranks of the poor, more children will arrive at school behind their wealthier peers, yet fewer will have the benefit of quality early education to help them catch up. The children who miss out on pre-kindergarten now will likely have lower reading and math scores in five years, when they enter fourth grade. In another decade, they’ll be more likely to drop out of high school.

“If you trace out those cohort effects, kids who don’t get good schooling early in life, typically score less well on standardized tests later. They have a more difficult time staying attached to school,” Land said.

Curtis Skinner, the director of family economic security at the National Center for Children in Poverty at Columbia University, said he’s seen similar trends in his own research.

“It means a lot of long-term bad effects,” he said. “We can expect more of these problems down the road.”

The recent extension of unemployment benefits has also reinforced the safety net for poor families, which could mitigate the experience of severe poverty, according to Sanders Korenman, a professor in Baruch College’s School of Public Affairs and a senior economist for labor, welfare, and education under President Clinton.

Korenman, along with other researchers, agrees that the recession has yet to unleash its full force on most families, leaving uncertainty about how children will ultimately fare. The federal bailout delayed the fiscal crisis in most states, but now, huge cuts in education, public safety, and Medicaid are imminent in many states.

“The strongest evidence for adverse impacts is long-term, severe poverty,” Korenman said. “Certainly a recession like this raises the risk for that.”

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Why So Glum? Well, for Starters…

The New York Times’ Floyd Norris spends more than 1,200 words wondering why on earth people aren’t more cheerful about the economy. Well, not people. Specifically, President Obama. Norris thinks that since economists say that the recession is over, Obama should take up that message and go forth with it, talking it up in his speeches. Since Obama is not doing that, Norris is looking for explanations. Or, as he puts it:

But there are, I think, a number of reasons for the glum outlook that are unrelated to the actual economic data.

So his explanations for this mysteriously “glum” decision to ignore “actual economic data”?

First, the experts didn’t see the recession coming, and

Having been embarrassed by missing impending disaster, there is an understandable hesitation to appear foolishly optimistic again.

Second,

Both Republicans and Democrats have good reasons to be negative. Republicans are loath to give President Obama credit for anything, and no doubt grate when he points to his administration’s stimulus program as a cause of the good economic news, as he did in North Carolina.

Democrats would love to give the president credit. But much of the Democratic Party wants another stimulus bill to be passed, notwithstanding worries about budget deficits. Chances for that are not enhanced by the perception the economy is getting better.

Dear Mr. Norris: Without getting into the partisan slant of those two paragraphs, I would propose a third reason people are not optimistic.

THE UNEMPLOYMENT RATE IS 9.7% Fifteen million people are unemployed. More than 9 million people are working part-time when they want to be working full time. More than 6.5 million people have been jobless for six months or more.

Basically, the issue is that Floyd Norris doesn’t give a damn about working people, and he’s bewildered by the things President Obama is saying…because he doesn’t get that at least some of the time, that’s who Obama is talking to. And when people are barely keeping their heads above water, unemployed or without the full-time work they need in many cases for more than half a year, and the Treasury Secretary has said that unemployment is going to be “unacceptably high for a long period of time,” you don’t go to them and say “well, economists tell me that the recession is over! Problem solved!” The problem is not solved for tens of millions of people. So unless you just don’t think those people matter, the question “why so glum” is not one that really needs to be asked. The answer is obvious.

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Turn Out the Lights

This is what it looks like when you have no tax base:

More than a third of the streetlights in Colorado Springs will go dark Monday. The police helicopters are for sale on the Internet. The city is dumping firefighting jobs, a vice team, burglary investigators, beat cops — dozens of police and fire positions will go unfilled.

The parks department removed trash cans last week, replacing them with signs urging users to pack out their own litter.

Neighbors are encouraged to bring their own lawn mowers to local green spaces, because parks workers will mow them only once every two weeks. If that.

But don’t worry – people won’t be needing to mow those green spaces for long, because there’s no budget to water or fertilize them and they should be brown and dead within a few months!

With people unable to afford to spend much, the city’s sales tax collections went way down. Voters refused a property tax increase—and of course, property tax can be a horribly regressive form of taxation, since for instance someone might still be living in a house they could afford back when they had a job, but be on the brink of losing that as well.

So what you get is a graphic illustration of how you don’t climb out of a deficit without improving the jobs situation. Success breeds success. Doubling down on what’s not working now just leaves you on dark streets with no trash cans or safety officers.

For some people, that feels personal. There are the people who might lose the community center that’s taken care of their kids for reasonable rates. The business owners dependent on tourism—and how many tourists are going to go somewhere else when they hear about these cuts? And as for safety:

Hansen, the criminal-justice student, grows especially exasperated when recalling a scary incident a few years ago as she waited for a bus. She said a carload of drunken men approached her until the police helicopter that had been trailing them turned a spotlight on the men and chased them off. Now the helicopter is gone, and the streetlight she was waiting under is threatened as well.

Naturally, some business leaders think the answer is to just cut salaries for city employees. One resort executive thinks his business is a great example—after all, he only spends $24,000 per employee!

As Amanda Marcotte writes, this guy isn’t proposing a real answer to the problem. He’s part of the problem:

By paying his employees so little they can barely afford food and rent, he’s basically choking off a revenue stream into the city, because they aren’t paying that much taxes.  If his people could afford to do things like buy property, they’d pay property tax that the city could use to pay its lighting bill.  But here’s Bartolini, who is a huge part of the problem, complaining because some people out there aren’t starving to death, and starving the government while they’re at it.  Why is he complaining?  Presumably, a government that’s falling apart is what he wants.  Except that people like him are extremely narrow-minded and selfish, and I’ll bet you a lot of money he’s pissed, because infrastructure falling apart means that he’s losing tourist dollars to cities that aren’t teetering on the brink, or at least where the grass is green. But he can’t think about the money coming in, because he’s so intently focused on maximizing human suffering in the hated working classes.  He’s only interested in looking at ways to impoverish workers.

Now, maybe the resort executive doesn’t actually think his intention is to maximize human suffering. But the point is, he doesn’t care if producing profit entails human suffering. And he doesn’t care to see that the broader suffering of Colorado Springs is a result not of excessive expenditure but of inadequate resources.

Cities can’t do much about problems like these because they can’t deficit spend. The federal government can. So the question is, do we want the US as a whole to become Colorado Springs? Or do we want the government to spend now as an investment in the future, to rebuild the tax base, put people to work at good jobs, and come out on the other side with something better?

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Do You Believe in Magic?

We’re sure to see all kinds of economic reporting in the days and weeks ahead purporting to show that there’s no need for more concerted, large-scale action to address the jobs crisis. Highly detailed historical analyses will be used to try to bolster the argument that jobs will come back because “they always do”, that recovery is “just around the corner”, so there’s no need for new job-creation initiatives.

Under the curious headline Steep Job Losses Offer Hope for Fast Rebound, Floyd Norris, chief financial correspondent for the New York Times began his weekly “Off the Charts” column Jan. 16 asking:

Will labor markets in the United States remain weak for an extended period?
For many economists, the answer is yes. They point to the “jobless recoveries” that followed the two previous recessions, in 1990-91 and 2001, and see no reason this recovery should be any different. That has led some to call for a new round of stimulus spending.

But then comes the “but”:

But history indicates there may be more hope for a fast rebound than is generally expected. The two jobless recoveries were preceded by recessions in which employment declines were modest. But after recessions involving a sharp drop in employment, the rebounds have been much stronger.

Citing historical graphs, Norris makes the case that the sharp 5.2% increase in unemployment from December 2007 to October 2009 makes this recession comparable to the three other post-World War II recessions with steep job losses — the recessions of 1957-58, 1960-61 and 1981-82.
And because those three recessions were followed by rapid recoveries with sharp jobs increases, Norris contends, jobs may come back faster after this recession as well.

Or at least that’s the hope that is dangled before us. The two not-so-scientific assumptions being made are: first, that the economy is somehow magically guided by past statistical data; and second, that the current Great Recession is actually comparable to those previous three recessions. Since the first assumption should need no further explanation, let’s look at the second.

The recessions of 1957-58, 1960-61 and 1981-82 all did have sharp declines in employment, but none of them matched the depth of the current downturn. An even bigger difference is the record percentage of long-term unemployed in this recession. Currently more than 1 in 3 jobless workers have been out of work for 27 weeks or more. Longer durations of unemployment tend to make finding a new job even more difficult. And the sheer number of long-term jobless has exploded.
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