The Economic Recovery Turns 2: Feel Better Yet?

WASHINGTON (AP) -- This is one anniversary few feel like celebrating.

Two years after economists say the Great Recession ended, the recovery has been the weakest and most lopsided of any since the 1930s.

After previous recessions, people in all income groups tended to benefit. This time, ordinary Americans are struggling with job insecurity, too much debt and pay raises that haven't kept up with prices at the grocery store and gas station. The economy's meager gains are going mostly to the wealthiest.

Workers' wages and benefits make up 57.5 percent of the economy, an all-time low. Until the mid-2000s, that figure had been remarkably stable - about 64 percent through boom and bust alike.

Executive pay is included in this figure, but rank-and-file workers are far more dependent on regular wages and benefits. A big chunk of the economy's gains has gone to investors in the form of higher corporate profits.

"The spoils have really gone to capital, to the shareholders," says David Rosenberg, chief economist at Gluskin Sheff + Associates in Toronto.

Corporate profits are up by almost half since the recession ended in June 2009. In the first two years after the recessions of 1991 and 2001, profits rose 11 percent and 28 percent, respectively.

And an Associated Press analysis found that the typical CEO of a major company earned $9 million last year, up a fourth from 2009.

Driven by higher profits, the Dow Jones industrial average has staged a breathtaking 90 percent rally since bottoming at 6,547 on March 9, 2009. Those stock market gains go disproportionately to the wealthiest 10 percent of Americans, who own more than 80 percent of outstanding stock, according to an analysis by Edward Wolff, an economist at Bard College.

But if the Great Recession is long gone from Wall Street and corporate boardrooms, it lingers on Main Street:

- Unemployment has never been so high - 9.1 percent - this long after any recession since World War II. At the same point after the previous three recessions, unemployment averaged just 6.8 percent.

- The average worker's hourly wages, after accounting for inflation, were 1.6 percent lower in May than a year earlier. Rising gasoline and food prices have devoured any pay raises for most Americans.

- The jobs that are being created pay less than the ones that vanished in the recession. Higher-paying jobs in the private sector, the ones that pay roughly $19 to $31 an hour, made up 40 percent of the jobs lost from January 2008 to February 2010 but only 27 percent of the jobs created since then.

Kathleen Terry is one of those who had to settle for less. Before the recession, she spent 16 years working as a mortgage processor in Southern California, earning as much as $6,500 in a good month, a pace of about $78,000 a year.

But her employer was buried in the housing crash. She found herself out of work for two and a half years. As her savings dwindled, the single mother had to move into a motel with her three daughters.

They got by on welfare and help from their church and friends. Terry started taking a 90-minute bus ride to job training courses. Eventually, she found work as a secretary in the Riverside County, Calif., employment office. She likes the job, but earns just $27,000 a year. "It's a humbling experience," she says.

Hard times have made Americans more dependent than ever on social programs, which accounted for a record 18 percent of personal income in the last three months of 2010 before coming down a bit this year. Almost 45 million Americans are on food stamps, another record.

Ordinary Americans are suffering because of the way the economy ran into trouble and how companies responded when the Great Recession hit.

Soaring housing prices in the mid-2000s made millions of Americans feel wealthier than they were. They borrowed against the inflated equity in their homes or traded up to bigger, more expensive houses. Their debts as a percentage of their annual after-tax income rose to a record 135 percent in 2007.

Then housing prices started tumbling, helping cause a financial crisis in the fall of 2008. A recession that had begun in December 2007 turned into the deepest downturn since the Great Depression.

Economists Kenneth Rogoff of Harvard University and Carmen Reinhart of the Peterson Institute for International Economics analyzed eight centuries of financial disasters around the world for their 2009 book "This Time Is Different." They found that severe financial crises create deep recessions and stunt the recoveries that follow.

This recovery "is absolutely following the script," Rogoff says.

Federal Reserve numbers crunched by Haver Analytics suggest that Americans have a long way to go before their finances will be strong enough to support robust spending: Despite cutting what they owe the past three years, the average household's debts equal 119 percent of annual after-tax income. At the same point after the 1981-82 recession, debts were at 66 percent; after the 1990-91 recession, 85 percent; and after the 2001 recession, 114 percent.

Because the labor market remains so weak, most workers can't demand bigger raises or look for better jobs.

"In an economic cycle that is turning up, a labor market that is healthy and vibrant, you'd see a large number of people quitting their jobs," says Gluskin Sheff economist Rosenberg. "They quit because the grass is greener somewhere else."

Instead, workers are toughing it out, thankful they have jobs at all. Just 1.7 million workers have quit their job each month this year, down from 2.8 million a month in 2007.

The toll of all this shows in consumer confidence, a measure of how good people feel about the economy. According to the Conference Board's index, it's at 58.5. Healthy is more like 90. By this point after the past three recessions, it was an average of 87.

How gloomy are Americans? A USA Today/Gallup poll eight weeks ago found that 55 percent think the recession continues, even if the experts say it's been over for two years. That includes the 29 percent who go even further - they say it feels more like a depression.

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  • by obamanot on Jul 3, 2011 at 06:47 PM
    Anonymous@9:15,you are welcome Lavon!
  • by Anonymous on Jul 2, 2011 at 06:15 PM
    Thank You Mr. President Obama.
  • by Anonymous on Jul 2, 2011 at 06:00 PM
    Nothing has improved since Obama has been in office... he promised unemployment would never go above 8%... he's a liar. Obama is a miserable failure...his suppoters drink too much Kool aid
  • by AMD on Jul 2, 2011 at 05:57 PM
    Where is Lavon, Barlow, Data Man, saywha? and the other Obama supporters on this story? I guess they are just like CNN and MSNBC, they only cover stories they want to hear and refuse to believe otherwise.
  • by Mike Location: Edenton on Jul 2, 2011 at 05:00 PM
    Yeah... what recovery? Thanks Mr. President for your "leadership" and the CHANGE you promised. Is this the kind of change all those who voted for him envisioned? I hope you're satisfied! I didn't vote for him because I could see through the veil based on his past performance. And I'm sure as H*** ain't satisfied!
  • by Taxpayer2 Location: ENC on Jul 2, 2011 at 03:55 PM
    The economy can't improve when the President is on his course of 'wealth redistribution' in the form of endless new regulations on the people that actually pay taxes. Why should I as a small businessman work 7 days a week to build and increase my business when most of the profit from my efforts go to the government? Now I relax and go to the beach and kick back. I will not work freely for the government.
  • by Big Red Location: Greenville on Jul 2, 2011 at 03:06 PM
    If it weren't the Fourth of July weekend, I'd swear this was an April Fool's joke. Who are they kidding? And WHAT economic recovery? Obviously, this is another media cover up of how bad this administration's policies have been or a cruel hoax. However, the millions of unemployed and the millions that have had their homes foreclosed on, aren't laughing.
  • by Local on Jul 2, 2011 at 02:23 PM
    When capital gains tax loses its cap, and everyone pays a fair share in taxes, revenue will increase. Until then, corporations will sideline their investment cash and will not create jobs. It makes no sense for them to create jobs right now.
  • by Anonymous on Jul 2, 2011 at 11:55 AM
    What recovery?
  • by BLAHammed on Jul 2, 2011 at 11:29 AM
    Jan.of 2009(oBLAHma inauguraton) to now,gas up 84%,corn up 78%,cotton up over 100%,soybeans up 42%,Sugar up 165%,Unemployment rate for blacks up 25.4%,Overall unemployment rate up 23.7%,Number unemployed in Jan.2009 11,616,00 now unemployed, 14,485,00,food stamp recipients up 35%,long term unemployment up 146.2%,poverty rate up 8.3%,National dept up 33%,food is sky rocketing,housing market sucks,oBLAHma cant seem to pass a budget in almost 800 days in office,and the list goes on.So much for being out of a recession.Now if you feel better about this you have been in the PJ(pelosi juice)mixed with that koolade you have guzzeled.
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