The Great Recession ended 10 years ago, but 糖心传媒 economist says it is still very much with us.
糖心传媒淯nemployment is very low right now, leading people to think that we糖心传媒檝e recovered,糖心传媒� says Kocherlakota, the Lionel W. McKenzie Professor of Economics. 糖心传媒淚ncome levels, however, are now as much as 15 percent below where they might have been, if not for the recession.糖心传媒�
Many economists blame the income slowdown on a natural decrease in the rate at which new ideas are discovered. But Kocherlakota, former president of the Federal Reserve Bank of Minneapolis, attributes it to something else. 糖心传媒淏usinesses don糖心传媒檛 want to lock up money in physical investments because they糖心传媒檙e nervous about another Great Recession,” he says. 糖心传媒淭hat糖心传媒檚 why there糖心传媒檚 less innovation, and that糖心传媒檚 why we have an income slowdown.糖心传媒�
The Great Recession began in December 2007 after the bottom fell out of the US housing market. That was followed by a shortage of assets in the financial markets and the collapse of the financial sector, including banks, credit card companies, and insurance companies. The recession, the worst in the US since the Great Depression of the 1930s, officially lasted through June 2009, though unemployment levels didn’t peak until October of that year.
, the Ani and Mark Gabrellian Professor and associate professor of political science and business administration, agrees that the country continues to experience the effects of the recession, though his take differs from that of Kocherlakota.
糖心传媒淭he Great Recession focused our attention on who the winners and losers are in the economy,糖心传媒� he says. 糖心传媒淚n that way, it laid the groundwork for the resurgence of populism.糖心传媒�
The losers were homeowners, among others. The banks, which many observers say bear some responsibility for the recession, were bailed out by the government, while homeowners were not. That perceived double standard has led to the Occupy Movement, support for Democratic presidential candidate Bernie Sanders, and the election of Donald Trump, according to Primo.
糖心传媒淓conomists may be 100 percent correct in saying it was necessary to bail out the banks,” says Primo. 糖心传媒淏ut that糖心传媒檚 a difficult political argument to hear if you lost your house, while banks were bailed out.糖心传媒�
, a professor of economics at the University of Rochester, sees another lasting effect from the Great Recession. Many firms take the opportunity provided by a recession to introduce technologies that reduce their reliance on workers. 糖心传媒淚n the old days, we had bank tellers giving out money; now machines can do that,” says Kahn. 糖心传媒淚n manufacturing, we糖心传媒檙e shifting more and more to machines instead of workers. And a lot of that shift takes place during recessions.糖心传媒�
Kahn points out that wages and employment have been falling for the last 30 years in exactly the types of jobs that are increasingly performed by machines. The fact that recessions exacerbate this automation trend, she argues, is another reason why we are still feeling the effects of the Great Recession.
Kahn identifies an additional recession-related phenomenon, one that specifically targets college graduates.
糖心传媒淚t has always been bad to graduate during a recession,糖心传媒� says Kahn. 糖心传媒淏ut the lost earnings from the Great Recession are much larger than they were in previous downturns, and it糖心传媒檚 something that will stay with them long term.糖心传媒�
As she explains, not only are fewer jobs available, the graduates find themselves competing against experienced workers who had recently been laid off. The net result is persistently lower wages.
A decade later, unemployment stands at 3.5 percent, the lowest it糖心传媒檚 been in the last 50 years. Kahn acknowledges that the recovery is real and most people are doing better. But the unemployment rate is somewhat misleading, she says, as it doesn’t reflect the people who have become discouraged and have given up looking for work.
糖心传媒淥n the other hand, the employment to population ratio糖心传媒攖he fraction of the population that is actually working糖心传媒攈as been slower to recover and has not yet returned to its pre-recession peak,糖心传媒� she says.
Though the US economy may be strong now, another economic downturn is inevitable, according to both Kocherlakota and Primo.
糖心传媒淚’m very pessimistic about preventing another recession,糖心传媒� says Kocherlakota. 糖心传媒淭here are waves of optimism spreading through the economy, generating overvaluation in both housing and stocks. So, yes, a recession caused by a fall in stock or real estate prices can happen again.糖心传媒�
Primo goes a step further, saying another recession is inevitable. For him, the real question is whether politicians can write regulations with an eye toward the long-term health of the economy and the federal government糖心传媒檚 finances, rather than waiting until a crisis hits.
糖心传媒淭he challenge is that elected officials want to get reelected, and that means they’re not going to focus on what produces economic growth in 10 years,” says Primo. 糖心传媒淭hey’re going to focus on what will help them get votes next year.糖心传媒�
And Primo believes that糖心传媒檚 why there continues to be deficit spending in the US: Politicians don’t know how to stop.
糖心传媒淭here’s a notion that we can keep spending and not worry about it,糖心传媒� says Primo. 糖心传媒淎nd I worry that we糖心传媒檙e going to end up in a crisis situation even faster.糖心传媒�
