Amer­i­cans in a funk as hous­ing, jobs stall

The Washington Times Weekly - - Politics - BY PA­TRICE HILL

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 cr isis­plagued 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.

Po­lit­i­cal woes

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

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.

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 peo­ple’s 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.

Na­tional char­ac­ter

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.

ASSOCIATED PRESS

End of the Amer­i­can Dream? A home that is listed as in fore­clo­sure in seen in Los An­ge­les.

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