Across US, Long Recovery Looks Like a Recession
This is not what a recovery is supposed to look like.
In Atlanta, the Bank of America tower, the tallest in the Southeast, is nearly a fifth vacant, and bank officials just wrestled a rent cut from the developer. In Cherry Hill, N.J., 10 percent of the houses on the market are so-called short sales, in which sellers ask for less than they owe lenders. And in Arizona, in sun-blasted desert subdivisions, owners speak of hours cut, jobs lost and meals at soup kitchens.
Less than a month before November elections, the United States is mired in a grim New Normal that could last for years. That has policy makers, particularly the Federal Reserve, considering a range of ever more extreme measures, as noted in the minutes of its last meeting, released Tuesday. Call it recession or recovery, for tens of millions of Americans, there’s little difference.
Born of a record financial collapse, this recession has been more severe than any since the Great Depression and has left an enormous oversupply of houses and office buildings and crippling debt. The decision last week by leading mortgage lenders to freeze foreclosures, and calls for a national moratorium, could cast a long shadow of uncertainty over banks and the housing market. Put simply, the national economy has fallen so far that it could take years to climb back.
The math yields somber conclusions, with implications not just for this autumn’s elections but also — barring a policy surprise or economic upturn — for 2012 as well:
- At the current rate of job creation, the nation would need nine more years to recapture the jobs lost during the recession. And that doesn’t even account for five million or six million jobs needed in that time to keep pace with an expanding population. Even top Obama officials concede the unemployment rate could climb higher still.
- Median house prices have dropped 20 percent since 2005. Given an inflation rate of about 2 percent — a common forecast — it would take 13 years for housing prices to climb back to their peak, according to Allen L. Sinai, chief global economist at the consulting firm Decision Economics.
- Commercial vacancies are soaring, and it could take a decade to absorb the excess in many of the largest cities. The vacancy rate, as of the end of June, stands at 21.4 percent in Phoenix, 19.7 percent in Las Vegas, 18.3 in Dallas/Fort Worth and 17.3 percent in Atlanta, in each case higher than last year, according to the data firm CoStar Group.
Demand is inert. Consumer confidence has tumbled as many are afraid or unable to spend. Families are still paying off — or walking away from — debt. Mark Zandi, chief economist of Moody’s Analytics, estimates it will be the end of 2011 before the amount of income that households pay in interest recedes to levels seen before the run-up. Credit card delinquencies are rising.
“No wonder Americans are pessimistic and unhappy,” said Mr. Sinai. “The only way we are going to get in gear is to face up to the reality that we are entering a period of austerity.”
This dreary accounting should not suggest a nation without strengths. Unemployment rates have come down from their peaksin swaths of the United States, from Vermont to Minnesota to Wisconsin. Port traffic has increased, and employers have created an average of 68,111 jobs a month this year.
After plummeting in 2009, the stock market has spiraled up, buoying retirement accounts and perhaps the spirits of middle-class Americans. As a measure of economic health, though, that gain is overstated. Robert Reich, the former labor secretary, notes that the most profitable companies in the domestic stock indexes generate about 40 percent of their revenue from abroad.
Few doubt the American economy remains capable of electrifying growth, but few expect that any time soon. “We still have a lot of strengths, from a culture of entrepreneurship and venture capitalism, to flexible labor markets and attracting immigrants,” said Barry Eichengreen, an economist at the University of California, Berkeley. “But we’re going to be living with the overhang of our financial and debt problems for a long, long time to come.”
New shocks could push the nation into another recession or deflation. “We are in a situation where our vulnerability to any new problem is great,” said Carmen M. Reinhart, a professor of economics at the University of Maryland.
So troubles ripple outward, as lost jobs, unsold houses and empty offices weigh down the economy and upend lives. Struggles in Arizona, New Jersey and Georgia echo broadly.
In 2005, Arizona ranked, as usual, second nationally in job growth behind Nevada, its economy predicated on growth. The snowbirds came and construction boomed and land stretched endless and cheap. Then it stopped.
This year, Arizona ranks 42nd in job growth. It has lost 287,000 jobs since the recession began, and the fall has been calamitous.
Renee Wheaton, 38, sits in an old golf cart on the corner of Tangerine and Barley Roads in her subdivision in the desert, an hour south of Phoenix. Her next-door neighbor, an engineer, just lost his job. The man across the street is unemployed.
Her family is not doing so well either. Her husband’s hours have been cut by 15 percent, leaving her family of five behind on water and credit card bills — more or less on everything except the house and car payment. She teaches art, but that’s not much in demand.
“I say to myself ‘This can’t be happening to us: We saved, we worked hard and we’re under tremendous stress,’ ” Ms. Wheaton says. “My husband is a very hard-working man but for the first time, he’s having real trouble.”
Arizona’s poverty rate has jumped to 19.6 percent, the second-highest in the nation after Mississippi. The Association of Arizona Food Banks says demand has nearly doubled in the last 18 months.
Elliott D. Pollack, one of Arizona’s foremost economic forecasters, said: “You had an implosion of every sector needed to survive. That’s not going to get better fast.”
To wander exurban Pinal County, which is where Florence is located, is to find that the unemployment rate tells just half the story. Everywhere, subdivisions sit in the desert, some half-built and some dreamy wisps, like the emerald green putting green sitting amid acres of scrub and cacti. Signs offer discounts, distress sales and rent with the first and second month free.
Discounts do not help if your income is cut in half. Construction workers speak of stringing together 20-hour weeks with odd jobs, and a 45-year-old woman who was a real estate agent talks of her job making minimum wage bathing elderly patients. Many live close to the poverty line, without the conveniences they once took for granted. Pinal’s unemployment rate, like that of Arizona, stands at 9.7 percent, but state officials say that the real rate rises closer to 20 percent when part-timers and those who have stopped looking for work are added in.
At an elementary school near Ms. Wheaton’s home, an expansion of the school’s water supply was under way until thieves sneaked in at night and tore the copper pipes out of the ground to sell for scrap.
Five miles southwest, in Coolidge, a desert town within view of the distant Superstition Mountains, demand has tripled at Tom Hunt’s food pantry. Some days he runs out.
Henry Alejandrez, 60, is a roofer who migrated from Texas looking for work. “It’s gotten real bad,” he says. “I’m a citizen, and you’re lucky if you get minimum wage.”
Mary Sepeda, his sister, nods. She used to drive two hours to clean newly constructed homes before they were sold. That job evaporated with the housing market. (Arizona issued 62,500 housing permits several years ago; it gave out 8,400 last year.)
“It’s getting crazy,” she says, holding up a white plastic bag of pantry food. “How does this end?”
You put that question to Mr. Pollack, the forecaster. “We won’t recover until we absorb 80,000 empty houses and office buildings and people can borrow again,” he says.
When will that be?
“I’m forecasting recovery by 2013 to 2015,” he says.
The 'Recovery' in Cherry Hill, N.J., and Atlanta
Cherry Hill, N.J.
The housing market in this bedroom community just across the border from Philadelphia never leapt to the frenzied heights of Miami Beach or Las Vegas. But even if foreclosure notices are not tacked to every other door, a malaise has settled over the market. Home prices have fallen by 16 percent since 2006, and houses now take twice as long to sell as they did five years ago.
That’s enough to inflict pain on homeowners who need to sell because of a job loss or drop in income. Some are being forced to get rid of their houses in short sales, asking less than they owe on a mortgage. As of last week, 10 percent of all listings in this well-tended suburb were being offered as short sales.
Chrysanthemums bloomed in boxes on the porch of one of those homes as a real estate broker unlocked the front door. In the kitchen, children’s chores were listed neatly on an erasable white board. Dinner simmered in a Crock-Pot on the counter.
There were few signs of the financial distress that prompted the owners to put their four-bedroom colonial on the market for less than they paid five years ago.
The colonial’s owners, James and Patricia Furrow, bought near the top of the market in 2005 for $289,900. Mr. Furrow, 48, retired in July after 26 years as a corrections officer and supplements his pension with work as a handyman. But his income is spotty, and his wife, who works in a school cafeteria, does not earn enough to cover the mortgage on the house where they live with their three children.