"What we really need is a 27th letter of the alphabet,” says #b#James Hughes#/b#, dean of Rutgers University’s Bloustein School of Planning and Public Policy. The swift V-shaped economic recovery, traditionally experienced after deep job-loss recessions, seems optimistic and, alas, less likely now.
Conversely, the “L,” or extended flatline model, standard after steep fiscal downturns and which takes ages before recovering, is probably too pessimistic. And let’s not even think about an unending series of “W” economic undulations.
Hughes will outline the potential shapes of our nation’s overall post-plunge recovery at the Middlesex County Chamber of Commerce on Thursday, January 21, at noon at the Hyatt Regency in New Brunswick. Cost: $75. Visit www.mcrcc.org.
“Be careful what you do at Rutgers,” Hughes jokingly warns his undergraduates. “If you don’t plan, you could end up spending your next 35 years here, like me.” Son of an Elizabeth bricklayer, Hughes began his career serving in the U.S. army in peacetime Korea. A state school scholarship and G.I. bill initially guided Hughes toward Rutgers, where he earned his engineering bachelor’s in 1965. Then, as he tells it, one professor after another lured him through a masters and Ph.D. in urban planning, and on into the then-new Bloustein School, where he has served as dean since 1995.
A nationally recognized expert on demographic and housing studies, Hughes has written 33 books, including “Tri-State Affluence: Losing by Winning,” “The Atlantic City Gamble,” and “America’s Demographic Tapestry: Baseline for the New Millennium.”
“We really are facing some good news,” says Hughes. “Think about it. Everybody, even the pessimists, are talking about our recovery — how, when, what shape? We are no longer staring into the abyss of the last year’s economic freefall.”
As we rounded out the gloomy final year of the decade, 2009 recorded the worst job-loss year since record-keeping began in 1939, and foreclosures hit the highest totals since charting began in 1959. Undeniably, things are looking up from there. The national mindset has morphed from fear of the dark to wondering how we find our way out of the forest.
This collective attitude adjustment becomes a self-fulfilling prophecy. However, the basic recessional wounds of job loss and foreclosure are still gaping. And no economic recovery is complete until they are at least mostly healed.
#b#Real employment#/b#. Our overall employment picture is a bit more grim than the rising national unemployment figures indicate — and it’s getting grimmer. This much-quoted unemployment picture tallies only those filing unemployment compensation claims. The broader “U-6” governmental jobless measure includes all those currently unemployed, as well as those underemployed. From an October high of 17.5 percent, governmental stimulus efforts have lessened the U-6 to today’s still alarming 17.3 percent.
The trouble, Hughes says, is that we came into 2010 8.1 million jobs down from the last two years, and we are not standing still. Every year another 1.3 million job-hungry individuals swell our national workforce. Thus, by the end of 2010, just to keep even with two years ago, our desperately laboring government will need to create 9.4 million more jobs — and 10.7 million by 2011, and so on. The first 1.3 million jobs are simply a wash.
“In this job creation effort, the private sector has been noticeably absent,” Hughes notes. “One of the real problems that got us into this recession initially was that companies’ capital investment in their own businesses lagged, while they turned instead to money market investing.” No jobs come out of hedge funds. No roadways get fixed from them.
Today we face a totally novel job-loss scenario. In all previous post-World War II recessions in which employment plunged, construction and manufacturing took the hardest hits.
In 2001 83 percent of the job loss lay within these categories. But now it is brains, not brawn, feeling the effects.
“This is our first knowledge-based-job constriction,” say Hughes. “This time knowledge and labor split the unemployment 50/50.” Unfortunately, regeneration of such knowledge-based positions cannot be so easily achieved as with stimulus programs’ funding of infrastructure repair projects.
#b#Foreclosing down#/b#. From 2001 to 2007 Americans used their mortgages as ATM cards and created a consumption bubble. Meanwhile, construction boomed to more than 2 million new units annually. Then the deluge, and in 2009 American contractors built only 600,000 new units. Like any other trade dropping to 30 percent of former production, construction floundered.
Government measures have definitely generated a bounce back. Real estate associations are noting small-percent sales gains. Hughes credits the federal Home Buyers Tax Credit and the Federal Reserve’s buying up of bad secondary mortgages as true lifesavers. However, what happens when that support is withdrawn becomes an uncertain prospect.
#b#Recovery patterns#/b#. The “good news” that we are groping for is cold comfort to the millions of individuals without a job or a home. Throughout the early days of the Great Depression, President Hoover tried to quell despair by reassuring those on bread lines, “I think we have turned the corner.” There is little doubt that job and home losses will continue, and probably increase — for awhile.
“We are not facing either easy or quick recovery models,” insists Hughes. The historical “V,” strong bounce-back model that’s profiled every post-World War II recession, would demand an unseen miracle today. The sharp spike-and-fall of the “W” pattern seems more probable. The government’s stimulants have indeed brought a lift, but they cannot prop up the nation forever.
The epic excesses, partly stemming from the 1999 bank and lenders deregulation, show signs of re-infection, with no legislation in place to banish them. In short, the greed of the money managers could do it all again. And again.
Hughes, himself, is a bit more hopeful. His “reverse-square-root” model envisions our climbing back after the steep plunge to near, although not quite as high, a point as before, then leveling off. Or it may be a shallow soup-bowl recovery, with a painfully slow, but definite climb back up.
Hughes wand. If given a magic wand to hasten the coming of either model, Hughes would point it at our nation’s industry. “The private sector must now invest ardently in their own businesses,” he says. “They must see to the repairing of our infrastructure and expand information technology.” He warns against the savings glut, created both by businesses and consumers.
It is a difficult prospect to base our nation’s prosperity on how much stuff its citizens squander their hard-earned dollars on.