Half of working adults pushed into unemployment, pay cuts or reduced hours.
The recession has directly hit more than half of the nation’s working adults, pushing them into unemployment, pay cuts, reduced hours at work or part-time jobs, according to a new Pew Research Center survey.
The economic shock has jolted many Americans into a new, more austere reality, which is likely to have lasting consequences for an economy fueled mostly by consumer spending. More than six in 10 Americans say they have cut down on borrowing and spending, the survey found.
The reason: Nearly half of the survey’s respondents say they are in worse financial shape as a result of the downturn, which destroyed 20 percent of Americans’ wealth.
“We’re going to see much lower consumption going forward,” said Dean Baker, co-director of the Center for Economic and Policy Research. He blames diminished spending on the drop in housing prices. “People who thought they had equity in their homes have seen it disappear,” he said.
The longest and deepest recession since the Great Depression has exacted a punishing toll that continues nearly a year after the economy started growing again. Hardest hit are the 9.7 percent of workers who have been out of a job for an average of nearly six months. Many Americans are delaying retirement and others have lower expectations for their children’s futures, the Pew poll found.
Among adults 62 and older who are still working, 35 percent say they have postponed retirement. Six in 10 working adults between ages 50 and 61 say they may be forced to do the same. Meanwhile, half of the survey respondents say they have whittled down their mortgages, credit card balances, car loans and other borrowing.
Four in 10 adults say they have tapped savings and retirement accounts to make ends meet. Others have sought help from friends and family. Almost a quarter say they have borrowed money from someone. And one in 10 — including 24 percent of workers from 18 to 29 years old — say they moved back in with their parents to weather the economic storm.
The new, more frugal lifestyles may outlast the recession and its immediate aftermath, the survey indicated. Nearly half of respondents say they plan to save more; nearly a third say they plan to spend less and 30 percent say they plan to borrow less.
While a broad swath of Americans have been hurt by the recession, blacks, who have a 15.5 percent unemployment rate, and Hispanics, whose jobless rate is 12.4 percent, have suffered disproportionately. Not only have they endured massive job losses, but they also have been hardest hit by housing foreclosures. Still, black and Hispanic workers are among the most upbeat groups about their personal financial situations and the national economy, the survey found.
“One likely explanation for these seemingly counter-intuitive patterns is that the election of Barack Obama (which came at the height of the recession in November 2008) appears to have put his most enthusiastic supporters — especially blacks, Democrats and young adults — in a more positive state of mind about many aspects of national life, including their perceptions of the economy,” the report said.
Overall, Democrats are now much more optimistic than Republicans about the economy, even though they have lower incomes and less wealth and have suffered more job losses during the recession. For most of the time that President George W. Bush was in office, Republicans were more upbeat than Democrats about the economy.
Even as they continue to reel from the downturn, most Americans are beginning to believe that the worst is over. More than six in 10 respondents say they expect their personal financial situation to improve in the next year, which the report called the rosiest outlook since before the recession began in December 2007. Similarly, 61 percent predict that the damage caused by the recession will be temporary.
Results for the Pew survey are based on telephone interviews conducted May 11 to 31 on landline phones and cellphones with a nationally representative sample of 2,967 adults 18 and older. The margin of sampling error is plus or minus 2.2 percentage points for the overall results. Interviews were done in English and Spanish by Princeton Survey Research Associates International.
Via Washington Post