Where's the bailout for Main Street?
This By Jim Jubak
There's no question that Wall Street needs help -- and it's getting it. But for the folks who are hurting most, this is no way to fight a recession.
Who's going to rescue the real economy? You know, the world of jobs and paychecks and grocery and doctor bills and filling up your car?
I see Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson scrambling to prevent the financial markets from imploding.
I see bankers and government officials meeting round the clock and on weekends to cobble together a deal to prevent a fire sale of Bear Stearns' (BSC, news, msgs) portfolio of mortgage-backed securities.
I see rate cuts on top of rate cuts and $200 billion credit lines on top of $200 billion credit lines that make it absolutely clear that Washington is determined to fix this financial crisis if it can.
But when it comes to the real economy, where people are struggling to make ends meet, where the work week keeps shrinking and where grocery bills keep expanding, all I see is a single $600 check -- $1,200 per family.
What exactly is that supposed to fix?
Hey, doesn't anybody know there's a recession going on?
Real pain in the real world
It would be hilarious that economists are still debating whether or not the economy has fallen into a recession if so many people weren't hurting so badly. If you live in the real world, you know there's a recession going on.
From January 2006 through January 2007, employment grew by 2%; over the next 12 months, through January 2008, employment grew by just 0.2% And the pain is worse than those numbers indicate. As employment growth slowed, so did wage growth, while at the same time inflation took a bigger bite out of paychecks. The rate of annual change in real wages -- pay adjusted for inflation -- turned negative in October. By January 2008, real wages were declining at an annual rate of 1%, according to the Economic Policy Institute.
So if you think your paycheck isn't keeping up with the price of milk, bread, medicine and gasoline, you're absolutely right.
And for many American families, this isn't a recent phenomenon. The median hourly real wage has been falling for the last three and a half years. So a family in the middle of the U.S. economic pyramid knows there's a recession going on; for some the recession has been going on for three years.
And, of course, that median family isn't among the worst off. Think of this the next time that anyone, myself included, tells you that the national unemployment rate is just 4.9% and that 4.9% isn't high enough to make this a real recession: Unemployment in Michigan was running at 7.6% at the end of 2007. It's one of seven states with unemployment rates above 6%.
Why isn't anybody helping?
What's puzzling to me, looking at these numbers and trying to imagine them not as digits but as people, is why we aren't doing more. Or, more exactly, why we aren't doing much of anything.
The last time we had a recession, the rather mild one that ushered in the current decade, Congress acted to extend unemployment benefits beyond the basic 26 weeks in March 2002. By that point in the recession, 1.3 million workers had exhausted their basic benefits.
Why's unemployment so low?
The unemployment rate is below 5%, low for such a seemingly weak economy. There are two possible reasons, says MSN Money's Jim Jubak: A lag in the official numbers and changes to traditional ways we work full-time and part-time jobs.
This time around, in the frantic effort to get any kind of stimulus package past both parties in Congress and past the White House, Congress refused to extend unemployment benefits for workers who had exhausted their basic benefits. Out of work for 27 weeks? Tough luck, we're cutting you off. You know, we're not really in a recession yet. It's just a slowdown. All you have to do is wait for those $600 checks to jump-start the economy