Will a new “American Dream” emerge from the current recession?

The number of newly laid-off workers filing claims for jobless benefits rose more than expected last week, after falling in five of the past six weeks, as employers remain reluctant to hire even with the economy showing signs of recovery.  (MSNBC Oct. 22, 2009)

Consumer spending stayed soft, as jobs remained hard to come by for the nation’s 15 million unemployed … in large part because companies aren’t hiring. (Wall Street Journal Oct. 22, 2009)

Yesterday, Harvard history professor Niall Ferguson predicted the decline of the American Empire. Basing his analysis on the fact that “America today is similar to the Spanish Empire in the 17th century and Britain’s in the 20thcentury”, Ferguson believes that the US is caught in a debt trap and that “excessive debt is usually a predictor of subsequent trouble.”

His assessment comes as the dollar continues to tank against most major currencies.falling-dollar

Looking at this from an economist’s perspective, Richard Clarida, a strategic analyst from PIMCO, recently stated that “An extended period of dollar weakness is likely to hurt the U.S. economy, as the currency’s decline doesn’t offer a “free lunch”. […] Eventually, a weaker dollar will likely worsen the U.S. terms of trade, potentially slowing growth of U.S. living standards.”

Evidence of these lower living standards (and their acceptance) is starting to creep through into nationally significant statistics. A pattern of falling salaries and wages is emerging  across America. The New York Times last week reported that “pay cuts, sometimes the result of downgrades in rank or shortened workweeks, are occurring more frequently than at any time since the Great Depression.”

If this economic  decline does continue, then what will be the new “American Dream” that rises from the ashes of this current recession?

For many, I suspect, it may be a simple desire for basic security and comfort rather than riches. And while 10% unemployment does not seem enough to be a gamechanger in this regard, we have to remember that  there is at least another 10%  who are financially stressed due to the fact that they are underemployed (those who are forced to work fewer hours than they would like). Twenty percent of the workforce in financial difficulty is a big number. 

608px-generalelectricsignAfter the extended trauma of this recessionary meltdown, it seems that many workers are indeed privileging security over wealth. Recent statistics from Courier-Journal.com show that “in Louisville-area employment, about 10,000 people applied over three days for 90 jobs building washing machines at General Electric for about $27,000 per year and hefty benefits.” A major attraction of these jobs were the aforementioned benefits, which included “medical, eye care, prescription and dental benefit packages, as well as pension, disability, tuition assistance and more.” And this total employment package was a negotiated decrease on amounts previously paid to workers at the plant. 

So, while 90 lucky workers got a job in this particular case, because many firms aren’t hiring at all, some people are losing everything. The truism that most people are only two pay checks away from the poorhouse has become a reality for many, and some of these have nowhere else to go except the streets.

This has resulted in the reappearance of something that was a familiar characteristic of the Great Depression (but something that I thought we would not see this time round), namely, the tent city. These tent “cities” have grown up chiefly in those states where home foreclosures have been highest. This includes California, a state that in the past was typically seen as being more recession proof than most. According to Reuters, “The state has 12.2 percent unemployment, above the national U.S. level of 9.8 percent, and at odds with California’s image as an oasis of opportunity in hard times.”

And you can see why security in the form of basic living conditions, such as a roof over one’s head, might be the new “dream” when you listen to those in the attached clip (posted on YouTube earlier this month):

To finish off, here’s a few more interesting recession-generated facts: 

 

  • Spending is at its lowest in 63 years
  • More people are using debit cards than credit cards
  • Americans are holding onto their cars for longer than ever: 9.4 years
  • Library membership is now at 68%, the highest rate ever
  • 30% of homes in America are now built by owners
  • Dentists report replacing more fillings because people are grinding their teeth due to stress
  • Gun sales are up 25% since January of this year. (presumably due to fear of uncertainty)
  • Vasectomies are up 48% (anecdotally because of financial pressures associated with more children)
  • Shark attacks are at their lowest point since 2003 (perhaps because of people taking fewer trips to the beach)
  •  

    Further recession reading at Notes: “They’re Happy Because They Eat Lard”: remembering the current recession

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    3 Responses

    1. •Dentists report replacing more fillings because people are grinding their teeth due to stress

      Or maybe more people are getting their dental work done while they are still covered by their work health plan?

    2. Highly unlikely. You know what’s it’s like — if there’s nothing wrong with your teeth, you never even think about them. Take it from me, I know, I’m about 6.5K into dentist bills this year.
      (I only grind my teeth when I run out of chewing gum late on a Saturday night! 🙂

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