Depressed About The Economy?
Maybe It’s Because You’re Earning Less.
Depressed about the economy? Maybe it’s because you’re earning less than you did before.
If that’s the case, you’re not alone. A new study from the Pew Research Center found that 55 percent of all adults in the “labor force say that since the Great Recession began 30 months ago, they have suffered a spell of unemployment, a cut in pay, a reduction in hours or have become involuntary part-time workers.”
The Pew Research Center’s Social and Demographic Trends Project also found that the Great Recession has led to a new frugality in Americans’ spending and borrowing habits. There’s also a diminished set of expectations about their retirements and their children’s future and a concern that it will take several years, at a minimum, for their family finances and house values to recover.
A small minority (15 percent) of those surveyed think the economy is doing just fine.
Among those who are currently employed, the Pew Research Center found that 28 percent of them have had their hours cut. Twenty-three percent have had their pay cut. Twelve percent had to take an unpaid leave and 11 percent had to take a part-time job when they would have preferred full-time employment.
More than half (54 percent) of those surveyed believe the country is still in recession, while 41 percent think the recovery has begun. Just 3 percent believe the recession is over.
No wonder consumer confidence levels have been dropping.
And when confidence in the economy drops, consumers start worrying about their jobs and stop spending. Sixty-two percent of those surveyed say they have become much more frugal and cut back on their spending since December 2007. And even after the economy improves, nearly a third of those surveyed say they will spend less than they did before.
Family finances are in dreadful shape. About half of those surveyed think their finances are in worse shape than they were before the recession started. Just 21 percent say their finances are in better shape. Government data shows that household wealth fell about 20 percent in the past three years, mostly due to the declining value of retirement accounts and home value.
As the survey points out, “This is the biggest meltdown in U.S. household wealth in the post-World War II era.”
And while the government keeps talking about “green shoots,” the Pew Research Center study found that its respondents are far more realistic about the long-term implications of the stalled economy: Sixty-three percent say it will take at least 3 years to recovery financially.
With this as a backdrop, it’s not hard to understand why the real estate market hasn’t recovered. If 55 percent of working Americans have lost a job, had hours cut, seen their pay slashed or had to endure a forced furlough, they aren’t out there looking to trade up to a larger, nicer property.
In fact, they’re not moving at all. They’re frozen by poor credit, homes that are worth less than the mortgages they’re tied to, and unemployment that’s running (officially) a bit under 10 percent, and as high as nearly 17 percent if you include everyone who’d like to be working but went back to school, or is working part-time instead of full-time.
To fix real estate, you’ve got to fix the jobs situation first – if it can be fixed at all.