NAPC Conference: The Economic Crisis, and Ways Forward

Heidi Shierholz, labor economist and co-author of "The State of Working America," addressed the NAPC conference next. She comes from the Economic Policy Institute in Washington, D.C.

Her slideshow presentation will be available shortly. The key points are:

1. Since 1973, productivity in the U.S. has increased. Median wages have not.
2. Poverty has stagnated since 1973.
3. The growth in GDP has gone to the highest 10%, specifically the highest 1%, and over one-third of all wealth generated has gone to the top one-tenth of one percent. By contrast, the bottom 90 percent shared 9.1 percent of the income growth.
4. Mobility declined.
5. Health benefits have declined.

And the economic bad news continues. This suggests that the conversation around the current economic crisis needs to start with the ongoing, 35-year decline in middle-class income and resistant poverty that was untouched by national growth in GDP.

The current recession has us with a 5 million job loss, over 11 million unemployed, and the trend lines still getting worse. And this does not include the "discouraged worker" who has given up and is no longer actively seeking work.

In January 2009, 22.4 percent of the unemployed has been unemployed for six months or more.

In January 2007, there were 1.6 job seekers for every job opening; in December 2008, there were 4.1 job seekers per opening.

Underemployment -- including unemployed, marginally attached workers and the involuntary part-timers -- is 13.9 percent. And unemployment/recession hits people differently by race and ethnicity -- much more dramatic increases in unemployment among black and Hispanic workers.

So what do we do about it?

The Wall Street actions try to get the credit markets flowing so that lenders can lend to businesses that want to expand capacity and people can make big-ticket purchases. The stimulus package intervenes on the demand side through job creation in infrastructure repairs and investments, relief for state governments, consumer supports (such as additional help for the long-term unemployed, food stamps and heating assistance), and tax cuts. (Heidi referenced Mark Zandi and his analysis of the stimulus package.)

The tough choice right now for individuals is between increasing savings/paying down debt and increasing spending. Families need to lower debt and increase savings, while the economy needs increased spending.

How long will recovery take? We don't know. Credit crunch recessions tend to be sharp and short-lived; real estate recessions tend to be more mild but take longer to recovery. We have both at the same time; we don't know how long it will take to bring the economy back. Past recessions have taken 25-47 months to get back to peak-level employment. From March 2001 it took nearly 4 years to get back to peak employment. Most likely, working families are in this for the long haul.