Center for Economic and Policy Research
Recession in 2008 Will Lead to Grim Economic Realities for Millions in US
“Pains of a recession this year may be felt through 2012”
A new report from CEPR economists Dean Baker and John Schmitt projects the likely effects of a mild-to-moderate or a severe recession in 2008 on the U.S. labor market.
“What We’re In For: Projected Economic Impacts of the Next Recession,” includes estimates of employment and unemployment by age, gender and race, as well as the estimated decline in real median family income, health insurance coverage and the number of people in poverty over the next three to four years.
According to the authors:
If the next recession follows the pattern set by the three most recent downturns, a recession in 2008 would raise the national unemployment rate by between 2.1 (a mild-to-moderate recession) and 3.8 percentage points (a severe recession along the lines of the early 1980s), increasing the number of unemployed Americans by between 3.2 million and 5.8 million. Based on the historical pattern, the unemployment rate and the number of unemployed would continue to increase through 2010 (to 6.7 percent in the case of a mild-to-moderate recession) or 2011 (to 8.4 percent in the case of a more severe economic downturn).
Depending on its severity, a recession in 2008 would see the black unemployment rate increase to between 11.3 percent and 15.5 percent, from a 2007 level of 8.3 percent. For black teens, recent historical experience suggests that the unemployment rate would climb to between 37.3 percent and 41.4 percent, from a 2007 level of 29.4 percent.
Depending on the severity of the downturn, the experience of the last three recessions suggests that the national employment rate would fall about two percentage points, implying a loss of between 4.2 and 4.6 million jobs.
In the event of a mild-to-moderate recession, health-insurance coverage would fall 1.4 percentage points nationally, leaving an additional 4.2 million individuals without health insurance. Strictly comparable data are not available for the severe recession of the early 1980s, but the effects of a recession of that magnitude on health-insurance coverage would likely be much larger.
A mild-to-moderate recession would reduce the median family income by just over $2,000 per year (in constant 2006 dollars) by 2010. A severe recession would reduce inflation-adjusted median family income by almost $3,750 per year by 2011.
A recession would also increase the national poverty rate by between 1.6 and 3.5 percentage points (from a 2006 level of 12.3 percent), raising the number of individuals living in poverty by between 4.7 million and 10.4 million people.
The full report and press release can be found at http://www.cepr.net/content/view/1445/8/.