Forum Post: The Great Recession, Six Years Later

this is excerpted from an article by Colin Jenkins called The Great Recession, Six Years Later

"The ever-increasing gap between corporate profit and workers income has also served as a death knell to the DJIA indicator. “In the postwar boom of the 1950s, the economy was growing so fast, and the benefits were so widely shared (throughout the socioeconomic ladder), that following 30 large American companies was a solid measure of most everyone’s personal economy,” Davidson adds. Back then, “what was good for GM really was good for the country.” In a modern economic environment that rewards CEOs 331 times more than the average worker, and 774 times more than minimum wage workers, this is no longer the case. (In 1983, this ratio was 46 to 1.) ………………………..

Despite recent and steady job growth, there are still 1.4 million fewer full-time jobs in the U.S. today than there was in 2008. A recent survey conducted at Rutgers University reports that more than 20 percent of all workers that have been laid off in the past five years still have not found a new job. When considering workers who have given up on job searches, the unemployment rate is estimated at more than 12 percent. A more accurate indicator than the unemployment rate may be the actual employment rate. When looking at this, we see that roughly 80 percent of “prime-age workers” (those between 25 and 54) had jobs in 2007. “That bottomed out at around 75 percent during the worst of the downturn, but has risen to only 76.7 percent since.”

New jobs simply do not stack up to the jobs that were lost. In sectors that experienced severe job losses due to the recession, workers are earning 23 percent less today. The average annual salary in the manufacturing and construction sectors—a particularly hard hit area—was $61,637 in 2008. It has now plummeted to $47,171 in 2014. Similar adjustments to income levels imply that $93 billion in lower wage income has been created during the recovery—meaning workers, across the board, are receiving a much smaller share than they were before 2009. A report by the United States Conference of Mayors (USCM) also showed that “the majority of metro areas—73 percent—had households earning salaries of less than $35,000 a year,” hardly a living wage for families facing ever-rising commodity prices.

Despite increased productivity and corporate profits, most workers’ wages have actually fallen. Biven reports, “From the first half of 2013 to the first half of 2014, real hourly wages fell for all deciles, except for a miniscule two-cent increase at the 10th percentile. Underlying this exception to the general trend at the 10th percentile is a set of state-level minimum-wage increases in the first half of 2014 in states where 40 percent of U.S. workers reside.” “As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966,” reported Nelson Schwartz in 2013. Dean Maki, chief U.S. economist at Barclay’s reports that “corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation,” adding that “there hasn’t been a period in the last 50 years where these trends have been so pronounced.”…………………..

Between 2008 and 2013, the number of U.S. households with a net worth of $1 million or more increased dramatically, from 6.7 million to 9.6 million. Households with a net worth of $5 million and $25 million respectively also increased. “There were 1.24 million households with a net worth of $5 million or more last year, up from 840,000 in 2008. Those with $25 million and above climbed to 132,000 in 2013, up from 84,000 in 2008.” The U.S. government, or more specifically, the Federal Reserve, has been instrumental in this uneven recovery that has been characterized by massive corporate profits and booming millionaires on one side (a small minority), and falling wages, increased poverty, and frequent reliance on food stamps on the other side (a large majority). According to a September 2014 study by the Harvard Business School, the widening gap between America’s wealthiest and its middle and lower classes is “unsustainable,” and “is unlikely to improve any time soon.” The nature of this latest recovery suggests that the final nail in the working-class coffin, whose construction has been underway since the birth of neoliberalism, has been secured into place. Despite desperate measures used to pump massive amounts of currency into the economy through QE, virtually none has trickled down to the 99 percent. It’s like déjà vu, all over again…and again…and again.