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How Much Did the Great Recession Cost You?

by Miranda Marquit

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.)

Great Recession RecoveryThere’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?


Published or updated October 15, 2013.
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{ 6 comments… read them below or add one }

1 RT

The great recession has actually been great for me. I continued investing through the downturn, so investments I purchased near the bottom have more than doubled now. I purchased a house near the bottom of the market, and the value of that is up now 33% since 2010. I was able to get a super low 5% mortgage on that, and then refinanced last year to a 3.5%.

If you want to make money, do as Warren Buffet says, “Be fearful when others are greedy, and be greedy when others are fearfull”. This market crash may have been a once in a lifetime opportunity. I encourage others, if we have another great market crash in our lifetime, keep buying stock in well run companies.

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2 Bryce @ Save and Conquer

The government cutbacks are having more effect on us now than the recession. Our workplace provides parts for space vehicle launches. The Sequester has taken money from NASA and space sciences, which has a direct effect on us. Some of our projects are on hold, and others got a stop work notice. Stop work means, essentially, those programs have been cancelled. Some coworkers have taken early retirement, and there are rumors that our division may close or be asked to move and consolidate with others. All of which means my wife and I may be looking for work soon.

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3 Ryan Guina

That is a tough situation, Bryce, and unfortunately, not an uncommon one with military and government contractors. If you have a feeling your contract may not be extended or you may get laid off, then it’s a good idea to begin making preparations for it, just in case. I write an article about that here: What to Do When You Know You Will Lose Job. The most important things you can do are: begin saving money in an emergency fund (or increasing the size of your emergency fund, if possible), pay off as much debt as possible, and working on your professional prospects, including updating your resume and possibly looking for a new job. The more prepared you are now, the less a layoff will affect you. Best of luck to you and your family!

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4 MoneyAhoy

Wow, great for you! Let’s just say I had a little less luck than that. We bought our house at the end of 2005 and I was one of the ones that panicked and sold some investments near the market bottom. I hope to not make the same mistakes next time :-)

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5 Kostas @ Finance Blog Zone

Yours would be one of the rare stories during the recession. I have heard of many that have lost a great deal, even friends in Canada, because of our financial difficulties. Did you have a safety net in place or did you just let it go and risk it all?

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6 dojo

This has been the best time for me. It prompted me to start my business (after losing my job – well, this part wasn’t good :)) and it really turned my life around.

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