Without adequate public spending, a catastrophic recession for some
By Lawrence Mishel, Heidi Shierholz,
January 13, 2009

January 13, 2009 | EPI Issue Brief #248

Without adequate public spending, a catastrophic recession for some

by Lawrence Mishel and Heidi Shierholz
Research assistance from Tobin Marcus

This analysis sketches a picture of how much worse we can expect things to get—both for the nation as a whole and for groups of Americans that are already suffering depression-level unemployment—unless the new administration and Congress act quickly with a recovery package that is big enough and well-targeted enough to counteract these trends. The authors recommend government spending on the order of $600 billion per year for the next two years to head off the otherwise inevitable catastrophe. Their analysis notes that without timely and adequate government intervention:

* Overall unemployment, after peaking at about 10.2% in mid-2010, could still be as high as 7.6% four years from now.
* Underemployment could reach 17.9% overall in 2010 (18.8% for women), affecting over 27 million workers.
* More than one out of every three working Americans would experience unemployment or underemployment at some point during the year 2010.
* Nearly one in five African Americans in the labor force would be unemployed (18.2%). More than half of all black teens would be jobless.
* Hispanic unemployment would reach 13.1% overall, and more than one-third among teens.
* Unemployment would reach a record high of 5.1% among the college-educated, 1.2 points above the previous high of 3.9% in the depths of the 1980s recession.
* All families would experience wage declines because of weakened labor market conditions and reduced hours and wages. On average, middle-income families would earn about $4,700 less per year in 2010 than in 2007 (a loss of 7.7%) Low-income families would lose an average of 9.8%, or nearly $1,600, per year.

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