If the recession is over, where are the jobs?


A few weeks ago, we asked the question “What is your investment strategy?” and described the survey Get Rich Slowly did of attitudes toward investing and a few related subjects. In that post, we noted, with a degree of surprise, that over 40 percent of respondents did not invest at all — and that the youngest respondents were the largest group of non-investors. What follows might help explain why young people are more reluctant to invest at this point.

Recovery from the Great Recession

Economists have taken the view that the economic recovery has been going on for five years or more now. That's because their definition of a recession is simply two consecutive quarters of negative growth in the GDP. However, the survey we conducted in the middle of 2014 also probed opinions about the economy — asking specifically if it has recovered — and it appears that mere mortals like us don't feel it that way. It's probably because it takes a while for the recovery to “trickle down” to us.

So, how did the mere mortals we surveyed feel about the recovery?

We started by asking: Do you think the economy has recovered from the Great Recession? Here is a summary of the responses:

recovery 01

As of mid 2014, according to our survey, fewer than 10 percent of respondents believed the economy had recovered from the Great Recession. Roughly half the respondents thought the economy may have recovered, but respondents said “no” more than four times as often as “yes.” The economy doesn't move that quickly, so even results from six months ago can provide insight into our current situation. From those responses, it's fair to say that respondents may not be quite as convinced of the recovery as economists expect.

Interestingly, men and women don't view the recovery the same way, as the following chart shows:

great recession recovery by gender

I don't have an explanation for these results, but the “no” among men outweighed “yes” more than twice. The results were even more striking among women, who said “no” almost twelve times as often as they said “yes.” Furthermore, the “noes” from female respondents were almost as many as the “maybes.” Women, it seems, are much less convinced of the economy's recovery than their brethren.

As you might recall, the survey didn't ask for age groups, but it did ask how many recessions respondents have weathered. We used that answer as a proxy for age, because (obviously) the more recessions you've weathered, the older you would be. In the chart below, you can see how these different groups responded. In order to get a better idea of the responses, the bars are colored from light to dark to reflect young to old in age.

great recession recovery by age

It is interesting that the greatest skepticism about the recovery can be found at both ends of the age spectrum. In fact, among the youngest age group, more respondents felt the economy had not recovered than even “maybe.” And almost none of them answered “yes.”

That response is not surprising, given some of the data.

Troubling data

Economists may pore over abstractions of the economy to determine its health — things like GDP and so forth. However, the face of the economy most of us experience up close and personal is employment and income. For most people, the unemployment rate is a much more tangible indicator of the health of the economy.

He who brushes his teeth in the White House every morning was correct to point out last week in his State of the Union address how the unemployment rate has fallen to the lowest point since the onset of the Great Recession. However, when you look deeper into the data, something troubling emerges: Although the overall unemployment rate has dropped to its lowest point in that period, the picture looks nowhere near as rosy for the younger members of the workforce.

great recession unemployment

You can see that the unemployment rate among the 20-to-24-year age group …

  • … is much higher than the overall average, but
  • … has really not declined significantly at all in the past five years.

We can look at that another way: Historically, the unemployment rate for the 20-to-24 age group has always been higher than the overall rate, averaging about 1.6 times the overall unemployment rate. However, in the past five years since the official end of the Great Recession, their relative unemployment rate has skyrocketed to 1.9 — almost double the overall rate.

great recession relative unemployment a

That is why it isn't surprising to see younger respondents feeling (quite strongly) that the recession of 2009 has not ended yet — the recovery, it would seem, does indeed look as if it is passing them by. Nobody knows exactly why this is happening. Some have speculated that more kids are going to college (which, they say, also accounts for the ballooning student debt problem), but the studies that have been done have not been able to confirm this.

This recovery, it seems, has not produced high-quality jobs over as broad a range as in the recoveries we have experienced from earlier recessions. However, it has produced what the country's leaders have been hoping for, and touting: a drop in the unemployment rate. Here is the chart you'll see on the front page of the Bureau of Labor Statistics (BLS):

great recession unemployment rate

Some of you might be thinking: Those numbers are as fake as Dolly Parton's bosom (as she famously claimed last summer at Glastonbury). Whether you think the numbers are real or not is not the point. The point is that people with a tremendous influence over your economic life believe them and, most importantly, do things that impact your life.

See that dotted red line? That is the target the Federal Reserve Board has set (or, to be more accurate, one of the targets) before they begin to raise interest rates. When exactly the Fed will begin to raise interest rates nobody knows for sure, but they have been warning us for more than a year that the move is imminent.

The next thing we don't know is how long it will be before interest rates drop again after that. It's been more than 30 years that interest rates have been steadily dropping. Nobody is suggesting rates will rise for 30 years before dropping again, but it could be a while. If inflation takes off and becomes a problem, interest rates can go higher than many people have seen in their lifetimes.

How does that matter to you?

1. The debt factor

As interest rates rise, debt becomes more expensive — that's obvious. Also obvious is that having no debt is the best way to handle a period of rising interest rates. It is also easy to deduce that, if you are going to have any debt, like a home mortgage, do what you can to make it fixed-rate.

2. The investment factor

This is a little more tricky. For the past 30 years, bond funds have done well. You would think that in a climate of dropping interest rates that wouldn't happen; but as interest rates drop, the market value of the bonds in a fund rises. Therefore, the overall value of bond funds have risen to record levels.

When interest rates rise, that stops. Bond values drop when interest rates rise. (You can Google that if you find it odd, but it is true.) In the coming years, you will need to keep this in mind when you make decisions on rebalancing your investment portfolio — what you did for the past 30 years might not work the same way when it comes to your bond funds. Of course, experts have been predicting rising interest rates for several years, and it still hasn't happened.

If you are able to buy bonds and hold them till maturity, the drop in market value will leave you unaffected, and you will continue to collect interest until the bond is paid off. However, few of us can afford to buy bonds “straight,” which is why bond mutual funds are the investment vehicle most people use to invest in bonds. And bond fund values are very much affected by changes in the market prices of the bonds.

Does this mean you have to bail out of your bond funds? No. What I am saying is that you need to be aware that a climate of rising interest rates usually causes the value of bond funds to decline.

The other thing to keep in mind is that simple short-term investments will begin yielding “real” returns again. Getting, say, 5 percent on your savings account sounds like pie in the sky today; but when interest rates rise, that is a distinct possibility. This is not going to happen overnight; but when you think long-term, keep in mind that the day may not be far off when things like CDs and high-yield savings accounts will become even more viable components of a balanced investment portfolio once again.

Would you say the economy has recovered? Especially if you are in the 20-to-24 age group, are you fully employed and how does that affect your interest to stay out of debt or to invest?

More about...Economics, Investing

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Adam
Adam
5 years ago

I prefer the Labor Force Participation Rate (aka the Employment rate), because it counts everyone of working age, except the incarcerated and institutionalized, including those who have stopped looking for work.

Looking at the “under-employed” rate is valuable as well.

JoeM
JoeM
5 years ago

From my biased view in a manufacturing state, it appears most of the job growth is fueled by low wage, low skill jobs that are often temporary in nature and sourced out to staffing agencies. These sort of jobs might be a positive blip in the short term, but won’t sustain real growth in the long term.

Pretty much regardless of where you live or what sort of debt you have (or don’t), it’s pretty hard to support yourself making $8-9/hour with 40 hour weeks.

K
K
5 years ago

Statistics don’t lie, but liars use statistics.

The youth unemployment rate (divided by the average) has “skyrocketed” from 1.6 to 1.9 over 6 years? This is admittedly a change, but it is a 20% increase.

Other misrepresentations:
The graphs don’t start at ‘0’. The timeframe changes in each graph (2013, 2009, 2001). Information doesn’t include things such as “how many more people are going to college?” or “how many have simply exited the workforce”.

Bill
Bill
5 years ago

I work in a university town and regularly interact with graduating students. I keep reading about this apparent lack of jobs, but when I see students graduating in STEM and business fields with two or three good job offers to choose from, months before graduation, I am confused.

Perhaps those who respond to the GRS surveys are a more pessimistic lot, or those who chose good majors and received jobs are too busy working to opine about the once-recessed economy.

Jane
Jane
5 years ago
Reply to  Bill

Bill, that’s easy. Those with STEM skills are very marketable. Also it depends on which university you are talking about.

But the real flaw in your statement is that you are only looking at a very specific sector. If you look at the entire labor market you will see the underemployed, the overqualified, and the unemployed.

Bill
Bill
5 years ago
Reply to  Jane

Twenty- to twenty-four year-olds have had four to six recession (or post-recession) years to develop marketable skills and education. It’s obvious to everyone that STEM and several other fields are highly in demand. So why is anyone leaving the university right now with a literature degree and complaining about the recession? I have sympathy and appreciation for those who enjoy literature and wanted to make something of it, but they had to know that jobs in certain fields would be hard or impossible to find. It’s been “news” for years!

Carla
Carla
5 years ago
Reply to  Bill

But not everyone has the capacity for STEM. STEM is for a select bunch of individuals that can process science, technology, engineering, and mathematics – not all of us can; and I almost resent how its being crammed down our throats as if its for everyone.

Beth
Beth
5 years ago
Reply to  Bill

I went into what was supposedly a high demand field. Guess what? Lots of other people had the same idea 😉 High demand fields don’t always stay that way when the supply of workers increases and the demand for the skills decreases.

I ended up leveraging my first career into a new career and

Beth
Beth
5 years ago
Reply to  Bill

and.. ooops! Something went wrong there. What I tried to say was I leveraged my first career into a new career where my skill set isn’t as common.

Yes, I have an arts degree (two of them, actually) but what made a difference for me was choosing programs with hands-on, applied skills and work-study options to gain professional experience.

By all means, people can take English literature if they want, but also learn something like technical writing and editing that people will pay them to do.

dealingwithdragons
dealingwithdragons
5 years ago

I’m not in my early twenties, I’m in my early thirties. A large percentage of my friends and acquaintances returned to school during the Recession because the only jobs they could get were flipping burgers. Now they’ve all graduated (again) and most are underemployed. They have a well-paying job, but only part time so no benefits and still not enough to make ends meet. So they fill in the gaps by driving for Uber or Lyft, or picking up odd jobs, or trying to make extra money from various crafty or unusual skills and knowledge. They’re not bothering to marry… Read more »

Jan
Jan
5 years ago

What I worry about the most is the number of employers walking out on benefits. They offer part time, contract jobs. When they do hire you, they offer contracts that can be easily broken. I know of one woman who lost her job because she got engaged. Another who was told her contract was ending, but they would “permit” her to stay on disability pay to deliver her baby. I thought those days ended in the 1980’s. I am seeing widespread abuse of the “internship” process. Getting your first, most inspiring years, at pauper wages. Your generation is so “tolerant”.… Read more »

Laura
Laura
5 years ago

I can’t cite specific statistics, but my overall take is that job growth has been concentrated in low-paying jobs, not middle-class jobs that pay a livable wage. Most people won’t say the economy has recovered until they feel they’ve recovered. Someone who cannot find a middle-class position and has had to take a low-paying position will (rightfully) not feel that a recovery has taken place. I’m 52 and I see a major shift in how businesses view workers and their role in communities. When I started in the working world, businesses took a paternalistic view towards their workers and surrounding… Read more »

mysticaltyger
mysticaltyger
5 years ago
Reply to  Laura

Beautifully stated, Laura. We need a change in attitude in this country, both on the part of businesses and the average worker…and I’ll add that I don’t think it’s something that can be fixed by more legislation.

Jon
Jon
5 years ago
Reply to  Laura

I agree with nearly everything you said, and you said it so well too. However I must nitpick one thing — Businesses do exist exclusively to generate profit. They have no other purpose. It certainly is nice when you see a successful business also really care for it employees and try to be a good corporate citizen — but when times get tight and the profit isn’t meeting expectations the “goodness” will become less of a priority and should become less of a priority. A business without enough profit to keep an entrepreneur engaged and willing to take the risk,… Read more »

Laura
Laura
5 years ago
Reply to  Jon

Thanks, Jon, for your compliments. I admit we disagree on one particular point. You say, “Businesses do exist exclusively to generate profit. They have no other purpose.” I would say that businesses exist PRIMARILY to generate profit but not exclusively, and they do have other purposes. One is to provide a product that people genuinely want and need. Another is to contribute to the community that they are a part of – to not merely profit off of that community but to contribute to it as well. Some of that contribution is through paying taxes that support the community’s needs,… Read more »

Rail
Rail
5 years ago
Reply to  Laura

Bravo Laura! Ditto. Cheers!

Ramblin' Ma'am
Ramblin' Ma'am
5 years ago

Part of my skepticism with stories about the economy recovering is that they treat all jobs as equal. Yes, the unemployment rate is lower than in 2008 or 2009. But many of the people who used to earn $50,000 a year are now earning $20,000.

Dave
Dave
5 years ago

Thank you for spelling out that the government defines a recession as two quarters of negative GDP growth. It seems to me that a lot of people forget this fundamental definition of economic growth. I think what most people ALSO fail to realize is that many nations throughout history (not just the US) have experienced trends like this – the economy is growing despite the fact the unemployment rate would suggest otherwise. That’s where the term a ‘jobless recovery’ was derived.

Enjoyed reading this, William.

Tommy
Tommy
5 years ago

So for a single group of people with an age range of 4 years, unemployment is still high, and thus there are no jobs for anyone? Whole lot of charts and graphs and words here (most unrelated to the title of the article) but I’m not buying the argument. Come to the booming upper Midwest where businesses are having trouble expanding because they can’t find enough workers. Also, I WANT interest rates to rise – I have my mortgage rate locked in nice and low and no debt, so bring on the higher rates!

Rail
Rail
5 years ago
Reply to  Tommy

I have to disagree with Tommy on the “Booming upper Midwest”. I have lived in Iowa my whole life (Iowegan since 1970) and we have seen a steady drain of manufacturing, agricultural, and related industries since the early 80’s. Companies like John Deere, Blue Bird bus, Rath packing, Farmland industries, Maytag Manufacturing, Rock Island, Milwaukee, and C&NW railroads, etc. have gone out of business or been merged, closed plants, moved out of state or been taken over/sold to someone else. A symptom of the USA in general I guess. Cheers!

Beard Better
Beard Better
5 years ago

Someone else already mentioned the questionable graphs, but I wanted to bring that up again. I don’t think you were trying to be purposely misleading, but I’ve been trained to raise an eyebrow when I see axes being played with in scientific journal articles. Overall, though this was an informative article. I think that the problem isn’t that the metrics you’ve used aren’t true, but that they are just poor metrics to use. Sure unemployment may be down in terms of raw numbers, but the footnote that always needs to be attached to this is that it doesn’t take into… Read more »

sean
sean
5 years ago

The jobs are back at college where everyone left them!

JDS
JDS
5 years ago

Very interesting article! As someone who lived through a recession before, I have to say that this recovery feels faked to me. The business owners we know are not expanding or hiring, nor are they having better profits than they had for the last few years. I hear about so many people under- and unemployed, including my spouse, who no longer collects unemployment and has given up looking for work for now, so is counted as “not unemployed” anymore to the government. Jobs are being lost where I work — 175 in the fourth quarter of 2014 in a very… Read more »

Kayla @ Cash Smarter
Kayla @ Cash Smarter
5 years ago

Interesting data. Thanks for sharing these figures with us.

Chelsea @ Broke Girl Gets Rich
Chelsea @ Broke Girl Gets Rich
5 years ago

Nice article – I found the investment factor section particularly interesting. Since I’m new to investing, it’s something I haven’t seen before, so I’m glad I read it and can have it in the back of my mind as I’m making investment decisions.

Verhanika
Verhanika
5 years ago

I’m not quite in the 20-24 range, I’m 28 and just graduated with a Master’s degree. While in grad school I was surrounded by many in my age range (though our program’s range was 24-60) and learned that my age peers were among the most skilled, motivated, and educated of the bunch, and yet we are having the hardest time gaining employment. I’ve been on a number of job interviews and informational interviews since and, despite having an advanced degree, can’t seem to find steady employment. Unfortunately, I’m now overqualified to work at my local coffee shop. Hard middle ground… Read more »

Nick | Millionaires Giving Money
Nick | Millionaires Giving Money
5 years ago

Looking at the stats young adults are having a tough time in this economy and are bearing the brunt of the slowdown. Not only are they investing less but they now have the burden of supporting an ageing population with shortfalls in their pensions. To overcome this government need to support this group and get them into well paid job so they can start earning and investing for the future. Very insightful post, thanks for sharing.

Marie
Marie
5 years ago

@Beth on comment 19….not sure why I can’t comment directly to you. Technical writer here, weighing in on the lack of jobs in that field. I was downsized twice in five years. For the next five years, I scraped by on freelance work and odd jobs. Now I’m finally seeing work again, but it’s all temp and contract jobs. Working a full-time permanent position as a tech writer seems to be a thing of the past.

Beth
Beth
5 years ago
Reply to  Marie

Yikes 🙁 Sorry to hear you’re having trouble. It’s a different situation where I live (Ontario) There are a lot of tech companies in Ottawa, Toronto and the Kitchener-Waterloo region, for example.

I think demand for any job is going to vary by location.

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