Another poll found that three in 10 Americans believe we're living through a depression rather than a recession.
Yet the reality that's breaking down Americans' sunny optimism is obscured by reports that the economy is in recovery, and has been since June 2009. That's a technical determination that does absolutely nothing for tens of millions of people living through the worst economic pain since the 1930s.
A little-discussed aspect of this downturn is that many Americans never fully recovered from the last one before the crash hit. In 2000, before the dot-com bust, a person right in the middle of the economic pack took home $27,833 inflation-adjusted dollars, and since then, that same person has only earned more in one year – 2006 (Excel). By 2008, the median income was a thousand bucks less than it had been in 2000, and then in 2009 and 2010 we saw the largest two-year drop in wages and benefits since 1962-'63.
Depressions don't always unfold in the same way. The bleak period following the 1929 stock market crash has come to be known as the Great Depression, but it was not the first brutal downturn to be characterized as such. Between 1873 and 1896, the big industrial powers went through what was then called the Great Depression, and has since become known as the Long Depression.
The Long Depression never reached the grinding severity of the 1930s downturn; in fact, it was actually two severe recessions that bookended a period of rapid growth in the 1880s. Today, having “lost” much of the past decade, and with the economy looking like it may well head into a second period of recession – or at best a gradual, drawn-out road to economic health – historians may well come to view this period as another kind of Long Depression.
Consider how bleak the 2000s were relative to past decades. According to the Economist, “In the years between 1940 and 1999 the number of Americans employed outside farming grew by an average of 27 percent each decade,” but the 2000s saw the employment rate actually fall by around 1 percent.
And nobody seems quite sure what the next great engine of economic growth might be, assuming one will arrive. Consider these worrisome signs that we may be living through a new depression.
1. During periods of recovery from past recessions, we've seen rapid job growth as the economy catches up. Last month, the US economy added only 54,000 jobs, the worst in a series of anemic job reports. This graphic, prepared by the New York Times, puts the current “recovery” in perspective relative to past downturns since the 1970s. Note that it took four years of growth following the early 2000s recession to return to the employment level that preceded it.
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2. The unemployment rate today is lower than at the height of the Great Depression, but the average length of unemployment is far higher than at any time since they began to track that data – the current record beats the one previously set in the early 1980s by around 17 weeks. As I've noted before, long-term unemployment has a long-term impact on those who suffer through it – and even impacts their children's earnings.
3. We've now seen declining home prices in 59 consecutive months. In January, the Zillow Home Value Index was off by 26 percent from its 2006 peak, a drop larger than that seen during the Great Depression. Prices have continued to fall, and economist Dean Baker says that “it seems virtually certain that prices will continue to decline at least through the rest of the year.”
4.The foreclosure rate remains sky-high. With an inventory of 1.9 million properties, it would take the banks three years just to unload what they already own, according to RealtyTrac.
5. As economist Paul Krugman notes, “public debt is not our only problem— in fact, it’s not the core problem. The key problem is, instead, the overhang of private debt.”
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6. With so much private debt and bad home loans, banks are writing off 3.4 percent of their outstanding loans, exactly the same rate that occurred in 1934, at the peak of the Great Depression.
7. The Guardian reports that “overdrawn American cities could face financial collapse in 2011, defaulting on hundreds of billions of dollars of borrowings and derailing the US economic recovery.” European cities aren't faring better; Florence, Barcelona, Madrid and Venice are all in deep trouble.
That's leading to cuts, which is only making matters worse because our core problem remains a lack of consumer demand, and cuts take dollars out of people's pockets.
8. Add in high gas prices, which also cuts into consumer spending. Last week, CNN reported that Walmart's “core shoppers are running out of money much faster than a year ago due to rising gasoline prices, and the retail giant is worried.”
It's a grim picture, but it doesn't have to be as bad as it looks today. Economist Paul Krugman called this bleak situation “a continuing tragedy,” and noted that “in a rational world bringing an end to this tragedy would be our top economic priority.” Yet “instead of a determination to do something about the ongoing suffering and economic waste,” he writes, “one sees a proliferation of excuses for inaction, garbed in the language of wisdom and responsibility.”
When historians look back on this era, they'll marvel at the degree of delusion that led lawmakers and the media to focus relentless energy on the deficit while turning a blind eye to the economic pain being felt by a majority of our citizens. Economists will write PhD theses detailing how this long, somewhat shallow Depression was nurtured by insane contractionary policies Congress enacted in the middle of a pummeling downturn.