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Great Recession 10 years later: The booming US economy has these 5 scars



That would be wrong.

Here's what America is still suffering on the road to recovery after ten years.

1. Big City Wins, Small Town Losses

The recession and its consequences have changed the geography of wealth in America – and the workers have still not caught up.

Employment employment, which has been declining since the 1980s, suddenly declined between 2007 and 2009 when factories were down. That made cities in Michigan, Ohio and New York City gasp. "These areas have been hit harder by the recession and are recovering more slowly than the national average," said Dave Swenson, an economics professor at Iowa State University.

The places where new opportunities emerged ̵
1; larger cities such as San Francisco and New York – did not add nearly enough apartments to keep pace with demand following the housing crisis in a double strike for residents of declining cities. Wage growth in big cities has been at the top of the pack, and even if you've found a job with intermediate skills for the tech or finance industry, it was financially impossible to take that job.

"The cost of living in major conurbations has become prohibitive," Swenson said. "It has slowed down part of this migration to urban areas."

2. State Households Atrophied

Government and local tax revenues suffered a massive blow during the recession and were only partially replenished by government grants, leading to widespread layoffs that weakened all types of public services. On the surface, according to Pew Charitable Trusts, tax revenues recovered – in 2018, revenue in all 50 states was 13.4% above the 2008 level.

But governments also had to cope with rising costs, especially for Medicaid. This makes it difficult to allocate funds for other priorities. Government spending on infrastructure as a share of gross domestic product is as low as it has been in the past 50 years, Pew noted, and state governments employ 132,300 fewer non-education workers than in 2008.

School funding remains scarce. Twenty-nine states now spend less per K-12 than in 2008, and public spending on higher education is 13% lower as public universities have shifted tuition fees to students – a study found that the degree was reduced Graduates and students.

3. The Mixed Blessing of Low Interest Rates

In order to maintain monetary circulation after the financial crisis, the US Federal Reserve lowered near-zero interest rates in late 2008 and raised them in 2015, along with several Rounds of bond purchases, referred to as quantitative easing, boosted the economy and led to an epic recovery of the stock markets.

But just as taking too much painkillers can cause side effects, the Fed's monetary stimulus has had some unintended consequences. For example, low bond yields meant that the big funds controlling trillions of investments put their money into private equity and hedge funds that paid high interest rates. As a result, IPOs, which can benefit a larger group of people from the creation of new companies, have virtually dried up.

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Meanwhile, low interest rates were bad news for pension funds, which rely mainly on bond yields to remain liquid. Public pensions assets accounted for only 66% of their liabilities in 2016, compared to 86% in 2007, according to the Pew Charitable Trusts. According to the actuarial company Milliman, this ratio was 87.1% for the 100 largest private pensions in 2018, compared to 105.7% in 2007.

For retirees who count on fixed income securities such as government bonds, this ratio may be low Interest rates also mean a lower standard of living.

"While low interest rates have many advantages, they are also associated with high costs to society," said Kevin Kliesen, an economist at the Federal Reserve Bank in St. Louis.

And these are just short-term interest rates that the Fed controls directly. Long-term interest rates declined before the financial crisis and the subsequent recession pushed them even further. Fed officials are now struggling to bring inflation up to its 2% target.

These low interest rates can deprive the economy of its vitality. A study published this year showed that they offer larger companies a greater incentive to invest than smaller ones. This promotes market concentration and reduces business dynamics – that is, the ability of start-ups to disrupt established businesses.

"As interest rates fall, they disproportionately prefer market leaders to market successors," said Atif Mian, a finance professor at Princeton University, who co-authored the study. This effect is "big enough so that low interest rates no longer have any expansionary effects on the economy".

4. A Humpling Generation

In any downturn, the hardest hit group is the one that is just beginning.

A study published this year by economists at Stanford University and the University of California at Los Angeles found that people who enter the labor market during a recession have a lower lifetime income, especially if they only have one have a higher education. They also have higher mortality rates in middle life.
The great recession, which was unusually deep and dragged on for a long time, has a lasting effect on young people who graduated in 2010 and 2011. According to Jesse Rothstein, economist at the University of California at Berkeley, employment and income are lower.
At the age when previous generations bought houses and had children, these characteristics of adulthood are less attainable, not because millennials do not want them. Rather, the Federal Reserve found that they had less fortune to work – and higher student debt.

5. The Shadow of Fear

As stubborn as the financial impact of the recession may be, the psychological effects dwindle even more slowly.

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People who Living in times of high local and national unemployment, spend less money and use more coupons than those who were not personally affected, even if they earn the same amount. This was found in a study by researchers from the University of California from 2018 -Berkeley. The recession also led to a rise in suicides, especially in rural areas and among women.
Americans' perception of their own financial situation has recovered only slowly. In a survey by Bankrate, 23% of respondents said that they are worse off than before the collapse of the economy. However, this feeling does not depend only on material well-being. A study published in the journal "PLOS One" found that the psychological pain of a financial loss is greater than the psychological benefit of an equivalent gain.

"Since the recession, there has been a greater separation between people's perceptions and their actual economic conditions," said Dana Glei, a sociologist at Georgetown University who co-authored the study.

Glei believes that this may have had to do with the proliferation of social media, which allow people to compare themselves to people who seem to be in better financial shape. And it is likely to exacerbate the political divide that has already been triggered by rising income inequality when people find someone responsible for their unfavorable economic circumstances.

"It raises questions of status anxiety," says Glei. "People cut in line, and I'm left behind."


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