The iVoryTowerz Guide to the Recession

by Jeff Siegel

Here at the underground blog, we want to help our visitors whenever we can. And, since so many of you haven’t gone through really tough economic times, where people lose their jobs, families cut back on spending, and you can’t put everything on plastic, we figured we should offer some guidance about what will happen over the next 18 months.

Here, then, are a few things to expect as the U.S. heads into its worst recession since I was in high school (in those dark days before iPhones, text messaging, and digital music). The U.S. suffered through a series of recessions in the 1970s and early 1980s, brought on by high energy prices, bank failures, and economic mismanagement in Washington. Yeah, I know, it sounds all too familiar.

1. It’s incredibly difficult to find jobs. The unemployment rate in 1982 was 9.7 percent, and was higher than 10 percent for much of the year. The numbers were even higher for young people, African Americans and Latinos. By comparison, the worst unemployment got during the relatively brief and mild Sept. 11 recession was 6 percent.

2. People make less money. Between 1979 and 1980, in fact, worker compensation actually went down 2.5 percent. The idea that you get a job, get a raise, get a better job, and get another raise is as much science fiction during a recession as Star Trek.

3. Money is tight, and families have trouble making ends meet. In 1984, according to U.S. Labor department statistics (that’s the earliest year in the survey), the typical American family had $700 more a year in expenses than it did in after-tax income. In 2006, the typical American family, given expenses and after-tax income, had more than a $9,000 surplus.

4. People don’t buy houses. Between 1980 and 1990, the percent of Americans who owned homes actually declined, from 64.4 percent to 64.2 percent. In the second quarter of 2008, despite all the problems we’ve seen, it was still 68.1 percent.

5. People don’t get credit cards and they don’t use them. The amount of consumer credit outstanding, measured by revolving credit (the technical term for credit cards) was essentially flat between December of 1979 and the middle of 1981. By comparison, the amount of credit card debt outstanding between August 2006 and August 2008 increased 13.3 percent.

Is it any wonder that those of us who lived through the 1970s and the early 1980s are remarkably un-nostalgic about the era?

For more background on the economic crisis, please see these archival posts:

(Political graphic from Wrapped-in-the-Flag, a website that offers copyright-free political material.)

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