Green Shoots: Is An Economic Recovery Underway?
NEAL CONAN, HOST:
A couple of years ago, news that the recession was officially over was greeted with snorts of derision. Growth was anemic, housing in freefall, unemployment stubbornly high. In early 2010, and again a year ago, reports of economic green shoots withered before spring. So a series of encouraging signs over the past few months have been met with understandable caution. But a cockeyed optimist might look at those numbers and say things are beginning to look good. There are more jobs, fewer unemployment claims. Some sectors of the economy are positively rosy.
So tell us how things have changed for you in the last few months at 800-989-8255. Email us: firstname.lastname@example.org. You can join the conversation on our website. Go to npr.org and click on TALK OF THE NATION. Diane Swonk is chief economist for Mesirow Financial in Chicago, an adviser to the Federal Reserve, where she joins us on the line from her office in Chicago. And nice to have you with us today.
DIANE SWONK: Good to be here.
CONAN: And again, today, the news of the unemployment claims, well, surprisingly good.
SWONK: Yeah. We're still getting - trending down. It means firing is finally abating. We hope something comes along with that in terms of more hiring. And we're also starting to see, at least for the moment, many of the public workers that have been let go, they're starting to fall as a percentage of the total of those unemployment claims. We really saw, you know, sort of, draconian cuts at the state and local level - teachers, in particular, accounting for over half of the losses at the state and local level really dominating much of last year.
That seems to be abating. The question is: Will they hand off the baton, the cuts at the federal level, which is likely to happen later this year? But for the moment, that's not in there.
CONAN: And we see some sectors of the economy - technology, automobiles, manufacturing, and cars are a part of that, but all of those are looking pretty good.
SWONK: Well, certainly, auto sales have picked up from the, you know, exceedingly low levels we saw. They're now consistent with kind of the jobless recovery of the early 1990s. So everything's relative. And much of the recent pick up in vehicle sales was due to where the money is, fleet sales, corporations replacing older fleets of cars. On the flipside, we've seen consumers going to great lengths to take what are now sort of record-age cars on the road, some autos tipping close to 11 years in average age of a vehicle, a car on the road, and they're still repairing those cars.
They don't want to buy tires, because those are really expensive, and, frankly, since we've not had much snow in much of the country, you don't need to buy tires as much. But they are buying a lot of things to repair and try to keep those cars going. So although they're doing better than they were, let's face it, the base is kind of low. The threshold's easy to - the hurdle's easy to clear, here.
CONAN: And it's no lower anywhere than in housing, but it does look like it may not be getting any worse.
SWONK: Well, yeah. We do have some housing construction going on. And, in fact, apartment construction is way up because apartment vacancies - people who couldn't live in their homes anymore had to live somewhere, and, hopefully, they'll live in some place other than a car. And so what we've seen is people moving into apartments, and apartment vacancies falling. This is a sector that really got cut off in terms of funding. Apartment construction stopped in August of 2007.
So rents are picking up, and you've got investors moving in. Almost all of the increase in housing starts today was due to apartment construction. It's also important to remember, we had something like 61 degrees in Chicago, and New York had really warm weather. Major parts of the country during December and January were extremely warm. That means a lot of the construction activity that we should see in the spring was actually occurring in January. So as good as it is, we're borrowing a little bit from the future because we are able to actually build in this nice weather.
CONAN: But do you understand, you know, some outside observer who's been on Mars for the last three years or in a cave, as they say, might come out and say, hey, you know, these numbers are not too bad. But people are sure reluctant to say it's looking up.
SWONK: You know, it's really hard, because one of the things that's really important to understand about the economy today is that the Great Recession, much like the Great Depression, had lasting effects. It wasn't just a deep-down recession, then balance out. It reminds me, I grew up in Detroit, and unlike other parts of the country, there were effects that accumulated over time. When you run an employment rate above 8 percent for an extended period - which we're now in 36 months over an 8 percent rate on unemployment - you start to literally damage long-term earnings, the fact that median household income is falling at an accelerated pace. By this point in time in the 1980s recovery, even though unemployment was still high, median family income had already stabilize and was beginning to pick up again, and that's not happening.
SWONK: So clearly, you know, the number of people that are still on long-term unemployment - over 40 percent of the unemployed has been unemployed for more than six months. That peak previously was 26 percent in the 1980s recession. So although things are picking up, let's face it, it's kind of like being caught in a traffic jam, we're moving forward. Some cars are stolen out. You get a bit of - a little bit of an opening and, you know, some cars have moved forward. We're seeing some of that in employment, but it's not enough to fundamentally make - sort of lift all tides, and clearly there's a lot of people that are still feeling left behind.
CONAN: We mentioned Detroit. We got this tweet from Dan Rice(ph): Live in Detroit, and it's halftime in America. After nearly 10 years in recession, my small Michigan business, improving slow but steady. Cars drive the U.S., exclamation point.
(SOUNDBITE OF LAUGHTER)
SWONK: Coming from Detroit and two automakers, my father, my stepfather - my stepfather was a UAW worker at Ford. My father was an executive at GM. I certainly understand that. The auto industry, coming off the lows there, now coming back. And that is starting to feed into Michigan's economy. They're even hiring. Let's face it, though, at its peak, GM hired - had over 600,000 employees. Now, they're moving from 50-something to 60,000. I mean, clearly, this is a different game than it once was, but it's better than the depth of the recession. And so there is something different coming on, and even Detroit is beginning to feel some of - a little bit of warmth from this unseasonably warm winter weather.
CONAN: Well, let's see some more anecdotal evidence from around the country. Give us a call and tell us how your economic life has changed over the past couple of months or so: 800-989-8255. Email: email@example.com. Carolyn(ph) is on the line with us from Denver.
CAROLYN: Hi. We have a system in our neighborhood with our friends, whenever we go on vacation, we kind of trade our pets. So if we're going on a vacation, we'll take our dog over to Lucky's house. And then his family goes on vacation, Lucky comes and stays with us. Well, this year after - I don't know, it's been three or more years since we've had a really good, long vacation with the kids. And we decided that spring break was going to be it and we're going to go take him on a trip. And so I call Lucky's family, and oh, no, they're going on a trip at the same time.
So I get in my network and I call other dog lovers around the neighborhood, who I know have watched our dog before, and they're going. It seems like our neighborhood will be emptying out for spring break. School closes and the neighborhood shuts down, and I don't who's going to take care of all of our pets. But he - that's a sign that maybe the economy is getting better, now that... There's this pent-up demand that people now feel they finally can take that trip they've wanted to.
CONAN: And presuming you can find a place to house Lucky, where do you plan to go?
CAROLYN: We're heading out to Costa Rica.
CONAN: Costa Rica?
SWONK: Is it cold in Denver? Do you have a lot of snow there, right now?
CAROLYN: Well, it's actually kind of seasonal right now. It's about - I guess, it's going to be 40 degrees, but there's still a lot of snow on the ground.
SWONK: The reason I asked is because, first of all, you're lucky because - well, Lucky is lucky. My dog, Ronald, nobody would want to take him. But...
(SOUNDBITE OF LAUGHTER)
SWONK: ...he's a little crazy. But in the broader economy right now, we actually saw in the first couple weeks of January, bookings for spring break are way down. And it's because places where I am, in Chicago, when it was in the '60s and lovely in the month of January, and it's still quite nice, they actually didn't book as much for vacations. And so you're in an unusual place where that's happening, but nationally that's not happening at all. In fact, destination vacations, it's one of the casualties of the unseasonably mild winter weather is - aside from going to skiing in Colorado and things like that - people go into tropics like you're doing.
And my guess, is you're probably getting a better deal because many of these destination vacation places are not getting the traffic that they thought they would have gotten, and it really is - it's unclear whether it's more economic or actually just the sort of weather thing when you're getting the nice cold snap. A year ago in Chicago, we had a blizzard that shut down an entire city for two days, and all of the sudden everybody wanted to get out of town and go some place warm. That's not happening in many parts of the country right now.
So your trend is a little different than the national trend, but there is, you know, there's a real mixed bag in terms of discretionary spending. What really is interesting to me is, you know, the people who are doing OK feel like there's a small percentage that have kind of made it back now, and you - it look, sounds like you're in that group. On the flipside of it - surveys of people who sort of got displaced during the recession, the number of people who think they'll never regain their living standard has gone up quite dramatically. And that's where you start to get disturbed, so this - it gets this unevenness of the recovery by income strata and also people who slipped out of what they once thought was the middle class and they now feel like, you know, they never can get back.
And so it really is uneven and it showing out in the kinds of retail spending too. People are spending on home improvement because it's unseasonably warm out, but they want to improve their home. They don't want to sell it, but they still want to live in it. We're seeing lots of interesting things going on in terms of spending. You know, they go out for spending for the discounts. The holiday sales hype was far exceeded the reality. Retail sales were not what everybody thought they would be in the month of January despite the fact we had five Sundays instead of four.
I didn't know this, New Year's Day is now shopping day. I went shopping on New Year's Day and got 30 percent off a purse by exchanging it some stuff that day versus the day before when I was in and I couldn't figure out what to exchange. So, you know, it really is phenomenal to see what our retail holiday is now. But that helped to boost retail sales, and they still weren't what people thought they would be in the month of January. So, you know, these things going on suggest that the consumer is uneven and still feeling some stress. So good for you. You're in a good place. And I'm sorry you can't find any place to put your dog. You know, you could probably ship him over to my neighborhood because a lot of dogs are still around because we're not going anywhere.
(SOUNDBITE OF LAUGHTER)
CONAN: Have a great time in Costa Rica, Carolyn.
CAROLYN: All right. Thank you.
CONAN: Well, let's see if we go next to - this is Herb, and Herb is on the line from St. Louis.
HERB: How are you doing, Neal? Good afternoon to you. I hate to be the party pooper, blaming all the truck drivers. But my wife lost her job in November. We actually live Lafayette. I'm a long-haul, over-the-road driver. I own my own truck. And my wife lost her job in November. She hasn't been able to find work. We lost our house, sold over two years ago. We got an apartment last summer that we're struggling to keep. Freight rates are - well, freight itself is way down. I - my wife lives - where we live in Lafayette, we have Wabash National, Subaru and Caterpillar, and they're not hiring. My freight is way down. In fact, I'm struggling just to keep my truck right now. If we lose this, we're in some deep doo-doo, so...
CONAN: All right. I understand that. So what kind of freight do you normally ship?
HERB: I ship anything that goes off. Flatbeds, I got - I haul housing materials. I haul a lot of Caterpillar. We haul the big diesel engines that run the generators in those big off-road dump trucks and the graders, we haul those. I just dropped a load of outdoor exterior trim at a place there in - just outside of St. Louis. I just came out of New York, where I took some shingles, but none of it's really - that's not where we're really going bang, bang, bang, bang like we were. Last year, it started to pick up. One of the trucking companies went out of business and we got a big boost over the Christmas, New Year's, and it didn't slowdown.
And all of a sudden, this January, just - right up until now, it's just creeping along here. We're just - we're just behind. I mean, I go home, in fact, eat out - ate the truck stops now at $30 a day, seven days a week. You're looking at $210 a week just to keep me and food, so I go home now, my wife cooks up a little of mini meat loafs. I put them in the refrigerator in my truck, freeze them up and cook home. She bakes all sorts of home good stuff for me, but, you know, I can't - we're not able to do anything.
Restaurants and the truck stops are shutting down between midnight, 6 AM
'cause there's no business. I just put $800 worth of work into my truck yesterday, with all the maintenance work, basically, brakes and (unintelligible), stuff like that. But it's still, I mean, it's, you know, nobody's - when you talk about holding on, only I got 2001 Ford Expedition. I think 140,000 miles on it. We're keeping it. We're not going go out buy a new car. It's just (unintelligible). And I know a lot Lafayette, Indiana is not feeling this big push that the government keeps screaming about and that I hear about. If you're (unintelligible) in Chicago, I'll be up there tomorrow. I'll wave at you when I go through Chicago.
CONAN: All right. Herb, thanks very much. Good luck.
HERB: Thanks, sir.
CONAN: We're talking about the economy. Might it be getting better? You're listening to TALK OF THE NATION from NPR News. And our guest is Diane Swonk, a chief economist for Mesirow Financial and an adviser to the Federal Reserve Board. Let's go next to Brandon, Brandon with us from Royal Oak in Michigan.
BRANDON: Thank you for taking the call.
BRANDON: I'm in a suburb outside of Detroit, and we're finally in the market for a home. I'm a first time homebuyer. And we found that, well, the economy hit us pretty hard. About two and half years ago, I did file for bankruptcy. And now being in the market for a home, which I thought we were in a really good place, we've found that it's become quite difficult. We've put bids on a couple of houses and actually lost two because we were outbid. And I'm really finding that there's a lot of the homes that...
CONAN: Forgive me, Brandon, you were outbid and, forgive me for saying this quite this tone of voice, in Michigan?
BRANDON: Yes, I know. It sounds pretty crazy, but...
SWONK: (Unintelligible) firming up, yeah. It's - you're actually - it doesn't surprise me. It is one - especially in turn-keys properties, Michigan is one of the places that starting to see some (unintelligible) prices. Now, it never saw the bubble, so it fell on prices after not appreciating. So that's important to remember. You know, again, the threshold you're dealing off of, one of the most affordable states in the country in terms of housing. And, you know, there is some activity. Michigan is coming back in the auto industry. You are seeing some come back there and some bonuses come back and money come back, and that's showing up in the state of Michigan.
So I'm not surprised that that's happening. It's interesting to put that together with, you know, the trucker story. There's actually a shortage of truckers, nationally. But again, this gets to the unevenness. Here this guy is related to a lot of housing-related stuff, and I'm listening to what he was hauling, and that was weak. So really it is, you know, it used to be, you know, when the tide comes in, all ships are lifted. Now, we know in Detroit that wasn't like that in the early '80s. It took a long time for us to get there, but we finally got there in the '90s.
And, you know, what was so unique about this great recession was how uniform the hits were. And now, as we're crawling our way back, how uneven it is and how happy we are to get just a little bit up. You know, in Michigan, it's a place where literally it did not have a housing bubble, and the housing prices fell. And so now you do have some turn-key properties, in particular, which are short in supply and those ones - I sold a house in Michigan. I have a second home in Michigan. I grew up in Michigan, and I sold them three days right in the height of the August crisis. I couldn't believe it.
So I certainly know that phenomena. I'm shocked by it, but I understand it. And it really gets to, again, how uneven and how, you know, it would be nice if, you know, we had just the same story from every single person that called in. But you're going to get much more variable stories. And particularly in this economy, the variability is cumulative, and so those who have been left behind is starting cumulate on them, while those who have made it there, you know, they made it through and they're kind of doing OK now. But that, unfortunately, there's still too many, really far too many of, sort of - we're even talking about their earnings. It could be affected for 20 years to come.
CONAN: Brandon, good luck.
BRANDON: Thank you.
CONAN: And, Diane Swonk, thanks very much for your time today and we hope you get a chance to get away for a vacation.
(SOUNDBITE OF LAUGHTER)
SWONK: Actually, you know what, I turn 50 in April and my husband is taking me to a very nice place, where I hope the dollar - or the dollar appreciates a little bit again more soon.
CONAN: Well, good luck with that.
(SOUNDBITE OF LAUGHTER)
SWONK: They speak French, so it's a good thing.
(SOUNDBITE OF LAUGHTER)
CONAN: Diane Swonk, chief economist for Mesirow Financial. She joined us on the line from her office in Chicago. Tomorrow, it's TALK OF THE NATION: SCIENCE FRIDAY. We'll see you again on Monday. I'm Neal Conan. TALK OF THE NATION, NPR News.
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