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Americans in a funk as housing, jobs stall
Disillusionment rife since recession
Question of the Day
The economy is entering the third year of an expansion that has been marked by robust business profits and a historic revival of Detroit’s automaker industry, among other boons, but most Americans don’t feel satisfied, opinion polls show.
What is generating the national economic funk, analysts say, is the lagging recovery in sectors that matter most to ordinary working people: jobs and housing. Moreover, an old nemesis for Americans — high gasoline prices — has made an unwelcome return even as consumers struggle without the growing incomes needed to deal with such higher prices.
America’s “hurry up and get there” mentality also is contributing to the widespread sense of dissatisfaction with the economy. A 2 percent annual growth rate that would be welcomed as healthy in crisis-plagued Japan or Europe is widely bemoaned in the U.S. as inadequate because it is not fast enough to produce hundreds of thousands of jobs each month.
Moreover, many people do not have the patience to await a gradual recovery in sectors such as housing that were hit hardest by the recession — even though economists say they must. The damage to the housing and construction industries has been so deep that it will take years — and possibly decades — for them to return to normal, analysts say.
“Something is amiss,” said Bill Barnes, an economics commentator at the National League of Cities, reflecting on the disgruntled national mood. “Officially, [the recession was over] more than two years ago. But a very high unemployment rate persists, and … that is a key measure of what normal folks mean by recession.”
With the national unemployment rate lingering at 9.1 percent, the economists’ view of the economy doesn’t seem to fit for most people, he said. “Recovery seems to be mainly about growth in [gross domestic product]” for them, he said. “Maybe growth is not the answer to all questions.”
The big housing burst
John Silvia, chief economist at Wells Fargo Securities, said Americans are grappling with some hard realities that are not making them happy but will dominate the economic landscape for years to come.
Foremost among them is the collapse of the housing market, which took with it millions of good-paying jobs in construction, home sales and mortgage finance that may never come back.
The housing boom of the last decade enriched millions of workers in the real estate industry and made Americans feel wealthy as the values of their homes seemed to double quickly and they were able to tap into those assets through increasingly exotic mortgage financing instruments that seemed to pose little cost.
“That era is over,” Mr. Silvia said.
The more than 30 percent plunge in home prices since 2006 — larger than the collapse in housing prices seen during the Great Depression and still continuing — has wiped out most of the gains in home value that made people feel good and left many “underwater” and with huge debts they can no longer afford and are struggling to pay.
The housing boom turned out to be a boondoggle fed by “misguided public policy” among politicians of both parties who strived to increase homeownership, Mr. Silvia said, combined with “excessively easy credit terms” that eventually bankrupted the banking system and many homeowners.
Given the ensuing devastation, the days of high-flying home prices and easy money probably will never return, he said.
Add to the nation’s monumental housing woes the increased difficulty of finding good jobs for millions of workers who don’t have appropriate training and education.
Manufacturers have moved millions of jobs overseas to take advantage of cheaper labor rates and be closer to their future customers in quickly emerging markets such as China and India. That leaves fewer jobs in the U.S., and those that are available require more technical skills and education, Mr. Silvia said.
“Brain, not brawn, is required,” he said, noting that the unemployment rate for people without high school diplomas is 14.6 percent, compared with 9.7 percent for high school graduates and 4.5 percent for college graduates.
But the harsh realities for many Americans may be just beginning, Mr. Silvia said. The federal government was an important source of largesse during the recession, providing free health care for many unemployed workers and beefed-up jobless benefits.
That source of support for millions of Americans is about to turn hostile as a result of unsustainably high public debts, he said. The unprecedented growth in dependence on government entitlement programs such as food stamps and Social Security that started during the recession has continued through the recovery, but it cannot go on indefinitely.
“The hard reality” is that “time has run out” on “40 years of political promises of outsized entitlement benefits,” he said. “Kicking the can down the road is no longer an option” for Congress and the White House.
Adding to the muddle is that Americans have never agreed about what caused the economic disaster of 2008 and 2009, when a collapse in the housing and financial markets led to a 6 percent plunge in economic output and the loss of 8 million jobs within a matter of months. Because people don’t agree about what happened, they don’t agree on what to do about it, Mr. Barnes said.
Democrats, controlling the legislative and executive branches at the time, mounted a major regulatory crackdown on the big Wall Street banks they blamed for the financial crisis, while they treated millions of defaulting homeowners mostly as victims and pushed for repeated dosages of “stimulus” spending from the government. Their efforts have helped produce only a half-speed recovery.
“Two major stimulus packages surely helped prevent things from getting even worse,” Mr. Barnes said. “But what might have happened isn’t tangible, and what has happened is bad enough to rivet peoples’ attention.”
Republicans, having taken back control of the House, are advocating a return to policies that existed before the crisis — including lighter regulation of Wall Street and other businesses and maintaining tax cuts for small businesses and upper-income taxpayers that they say will produce jobs.
“We’re nowhere near a consensus about what to do,” Mr. Barnes said.
Some analysts say Americans’ unhappiness is the result of too much emphasis on the economy, money and wealth — a national obsession with materialism and getting rich quick that distinguishes the U.S. from many other countries.
Despite the enshrinement of the “pursuit of happiness” in the Constitution, “Americans are a profoundly unhappy people,” said Bruce Stokes, a senior fellow at the German Marshall Fund. He said that reflects the hard knocks of the recession and a sense that U.S. economic dominance and “exceptionalism” are over.
“The sour mood in the wake of the Great Recession reflects growing disillusionment” and a “widespread sense that the United States is in decline,” particularly with respect to ascendant China, he said.
Contrary to popular belief, Mr. Stokes said, the nation’s economic performance looks good compared with most peers, he said. The U.S. continues to have the largest, wealthiest and most competitive economy, and it is recovering faster than the economies of Europe and Japan. But, like many of its peers, the U.S. is grappling with mammoth loads of debt and high joblessness.
While the U.S. continues to rank at the top in money and wealth, it does poorly on such intangible sources of happiness as “work-life balance” and “sense of community,” according to a new measure of the quality of life in the world’s major nations produced by the Organization for Economic Cooperation and Development.
America is outranked by Canada and 11 other nations as a land of opportunity. On the important question of “safety,” the U.S. ranks near the bottom — only a few notches above Mexico, the OECD found, because of widespread crime and violence.
The research on happiness suggests that Americans may need to start looking elsewhere than the economy for a more lasting sense of contentedness, Mr. Stokes said.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
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