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Economic Pains for Working People Mount

U.S. in Longest Recession Since the 1930s

by Adam Price |
May 11, 2009
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San José, CA - The United States is now in its longest recession since the Great Depression of the 1930s. At the end of April, the recession that officially began in December of 2007 reached 17 months in length, passing the deep 1981-82 and 1974-75 recessions. The economy has lost almost 6 million jobs, or 4.1% of total jobs at the beginning of the recession, the worst downturn since the recession of 1948. Unemployment in the African American community hit a depression-level 15% in April, while unemployment for Asian Americans has risen the fastest, more than doubling over the last year.

While the pace of layoffs has slowed from earlier in the year, the unemployed are finding it harder and harder to land new jobs. The average time out of work continues to rise, hitting more than 5 months in April. The number of workers collecting unemployment insurance benefits set a new record in April, at 8.5 million, almost three times the level of a year earlier. The number of people on the Federal Food Stamp program is also at a record high, with more than 32 million, or 10.6%, of the population getting food aid.

While jobs and income losses mount, home prices continue to fall. The price of homes has fallen 30% since the peak in mid-2006 as of February. This drop in price has led to more than one-quarter of homeowners being ‘underwater’ with mortgages greater than the value of their home during the first three months of 2009. One of the worst hit areas is in California’s central valley, where housing prices in Modesto and Stockton have fallen an eye-popping 50%.

Many banks had temporarily stopped foreclosure proceedings through March but are now ramping up their foreclosure efforts. These foreclosures are not only hitting neighborhoods that are mainly oppressed nationality, but also more and more renters who are being evicted when their landlords are foreclosed. Even apartment renters are being hit as former homeowners are competing for a place to live, keeping rents up even with the rising unemployment.

This situation is bound to increase the number of homeless people even as a record number of homes stand empty. During the first three months of 2009, 15% of houses were vacant, or more than 19 million homes. The situation has gotten so bad that one bank demolished new homes in Victorville, a city near Los Angeles, California, that it had foreclosed on - rather than trying to sell them.

In the past, many households could borrow against their homes to tide them over rough economic times. But with unemployment up and housing prices in their deepest fall since the Great Depression, household bankruptcies are soaring. In April, more than 125,000 individuals filed for bankruptcies, up 36% from a year ago. There could be as many as 1.6 million bankruptcy filings this year, almost three times the number of 2006 when filings plunged due to the bank-backed new law that made declaring bankruptcy much harder.

State and local governments are also being squeezed by the economic crisis. 47 of 50 states have budget deficits, totaling more than $100 billion for fiscal year 2009, which comes to more than 15% of their budgets. Despite raising taxes and cutting spending, California and many other states face growing deficits as the economy continues to deteriorate.

These budget cuts and tax increases are hitting working people both directly and indirectly. Here in California, state employees (except for prison guards, who make up two-thirds of state workers) were forced to take two days a month off without pay, which is almost a 10% cut in pay. States across the country are cutting health care spending for low-income families, even as more and more people are losing their health insurance due to job losses. Medicaid and the State Children’s Health Insurance Program or SCHIP are both under the gun, along with Temporary Aid to Needy Family (TANF or welfare) and other social service programs.

Local governments and schools are at the beginning of belt-tightening as property tax revenues fall along with housing prices and cuts in state aid. In March, some 25,000 public school teachers in California received early notification of possible layoffs for the fall. State universities and colleges are raising fees and cutting admissions to cope with budget cuts.

Despite the rising unemployment and bankruptcies along with falling home prices, Wall Street, the corporate-controlled media and many politicians are saying that the economy is bottoming out. They say that since the economy is getting worse at a slower pace, a turnaround is in the near future.

One problem with this rosy view is that corporations, weighed down with huge amounts of debt, are in trouble. Business bankruptcies are on the rise as more than 43,000 businesses declared bankruptcy in 2008, 54% more than in 2007. In April, Chrysler Corporation filed for bankruptcy, as the economic downturn, financial crisis and mismanagement finally sunk one of Detroit’s Big Three despite billions of dollars of federal government aid. As auto manufacturers close plants and shed jobs, there is a multiplier effect on parts suppliers and dealers.

Others base their optimism on the huge government stimulus package. But while the Obama administration program does provide some help for the unemployed, schools and transportation, a far larger amount has been spent on bailing out banks and other financial institutions. These same banks continue to cut back on lending that households and businesses need. In contrast, the federal government’s aid to General Motors and Chrysler is conditioned on even more factory and dealer closings that will cut - not create - jobs.

Even if the end of the recession is not far off, it will be marked by growth in the economy and corporate profits, not jobs. Many jobs in auto are gone for good as plants and dealers shut down. With millions of empty homes, construction jobs will not reach the peaks of the last housing boom. The FIRE (Finance, Insurance, and Real Estate) industries were among the fastest growing before the recession when the economy was piling on more and more debt, but no more. In the last two recessions in 2001 and 1991, job losses continued for up to two years after the recession ended.

But the people’s fight back against the crisis is growing. Workers and progressive people across the country rallied to support the Chicago Republic Window Workers and their union, United Electrical, Radio, and Machine Workers (UE) Local 1110 in their struggle against the shutdown of their plant by Bank of America. In Minneapolis, Minnesota, the People’s Bailout Coalition is fighting foreclosures and pushing for a people’s bailout bill in the state legislature by uniting labor, community and student organizations. In North Carolina, students, campus workers, and faculty protested the budget cuts at the University of North Carolina’s Board of Trustee meetings - just one of a growing number of fight backs against cuts in public education.

While most struggles are small and locally based, there is a growing anger at big bankers and big business who brought on the crisis. To add insult to injury, many of them are being rewarded with obscene bonuses, high salaries and tax cuts while the suffering of working people, and in particular in oppressed nationalities such as African Americans and Latinos, deepens. Time will tell that there is no recovery in sight for working people and that our real hope lies is organization and struggle, not the Democrats or Republicans in Washington D.C.

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