Many consumers still feel as though the Great Recession is still affecting them, even though it’s been over for years. (Technically, the Great Recession lasted from December 2007 to June 2009.)
There’s a reason that many of still feel the pinch, though. The Great Recession cost each household between $50,000 and $120,000, according to a recent study from the Dallas Fed.
That’s a pretty wide range, but the Dallas Fed feels as though there could be expenses not yet recognized, that could play into the final cost of the Great Recession. Even if you’re on the low end of the scale, a $50,000 impact to your household finances is pretty significant. It’s no wonder that many people still feel as though the recession is still in force, even though we have been seeing economic growth (albeit small growth) since the middle of 2009.
Costs of the Great Recession
A lot of the cost of the Great Recession is found in the loss of wealth. For many people, this loss of wealth came largely through falling home values. The number of home owners who suddenly found themselves underwater with their mortgages was huge. And, even though there are indications that the housing market is recovering, it’s been a long, slow slog.
Another consideration is the drop in wage income. The Great Recession prompted cutbacks at many companies. Even if you didn’t lose your job, there’s a possibility that your hours were cut, or that you lost some benefits. Underemployment is, perhaps, a lesser problem than unemployment, but it’s still a problem. The Dallas Fed looked at the loss of wages during the Great Recession, but also tried to factor in future lost wages as a result of continuing employment issues.
It’s also interesting to note that the Dallas Fed report takes into account the potential cost of reduced opportunity. This might include the fact that the Great Recession limited the chances for career advancement and raises. Upward financial mobility was hampered by the Great Recession in ways that are subtle and hard to quantify.
The Costs Aren’t Complete
The reason that the report shows a wide range of $50,000 to $120,000 in costs to households is due to the fact that the situation isn’t resolved yet. Economic output hasn’t returned to trend. And, if it never returns to trend, the total cost of the Great Recession to the economy could be has high as $14 trillion—or more.
When you think about the long-term impact of the Great Recession, it’s easy to see why some people still feel as though they are fighting a losing battle against a recession that is over. Even though there is nominal economic growth, the reality is that the labor market hasn’t returned to the “normal” seen prior to the Great Recession. Home values are still down from their trends. My own home’s value took a couple of years after the Great Recession to drop. In my area, the effects were somewhat delayed, and it’s only now that my home’s value has plummeted enough that I have slipped into negative equity.
How has the Great Recession impacted you? Are you seeing the costs in your life still? How have you worked to combat the impacts of the economy on your situation?