Learning from Past Economic Recessions

A little more than ten years ago, the U.S. was deep into one of the most severe and longest lasting economic recessions since the Great Depression. Millions lost their jobs and homes, and household wealth plummeted. While everyone across the nation felt the harsh sting of the Great Recession—it lasted from December 2007 to June 2009—communities of color suffered more severely.

U.S. unemployment peaked at 10 percent during the Great Recession, but unemployment rates were much higher for Black and Latinx: 16.8 percent for Black workers and 13 percent for Latinx workers, according to the Bureau of Labor Statistics. Unemployment among Black and Latinx workers didn’t return to pre-recession levels until 2017, and these communities had the highest rates of foreclosure and lost the most wealth during this period. What’s worse, some families never fully rebounded from that grim period.

Today, the nation is in the middle of a pandemic that has already wreaked havoc within communities of color, and economists, advocates, and political leaders warn that many of the factors that led to the racial disparities in unemployment, homeownership, and wealth during the last recession are still pervasive today.

“Over the history of our country, we have weathered a number of these sorts of colds, but in every case, it is clear that when America catches a cold, the black community has caught pneumonia,” wrote Rep. Bobby Rush (D-Ill.) in an op-ed for the Chicago Sun-Times. “This time, however, there is an actual virus that is ravaging our nation.”

Rep. Rush acknowledges that there are many lessons—and factors—that he and his fellow policymakers need to heed if they don't want history to repeat itself. Unemployment among the Black and Latinx community is concerning from a historical standpoint, especially as jobless workers examine their fate during the last economic crisis.

The severity of the Great Recession, for one, made it difficult for laid-off workers to find new jobs, which resulted in them exhausting their UI benefits. By July 2009, for example, nearly 51 percent of UI claimants exhausted their regular benefits. This was the highest rate of benefit exhaustion on record and “a painful indicator of the difficulty of finding a job in the current economy,” according to the Brookings Institution, challenging critics who saw extending UI benefits doing little to boost spending and more as a disincentive to find a job. Black workers alone experienced longer periods of unemployment—at 27.7 weeks in 2011. “Extended UI benefits provide crucial help to the Americans who have suffered the most in the recession—the laid-off workers who have been without work for six or more months. The benefit extensions enable these workers to maintain higher consumption than would be possible without the extra benefits.”

A Bleak Outlook Among the Unemployed

When looking back at the Great Recession, the experience was mixed among our many interviewees. But still, for all, they’re forced to reassess their future job prospects and financial wellbeing. “Back in 2008, I had family who could give me support … and I felt like [I] could always get a job. I had always been an essential worker,” said Brandy. “Now, you can’t even get through to anyone.”

Brandy, who lives in Bronx, New York, says it took over three months to get her UI application submitted and approved. As of July, her first payment was still pending without a clear reason from New York’s Office of Unemployment Insurance. “I’m exasperated,” she said

Wendy had a similar story. “I lost everything during the last recession,” explained Wendy, who filed for bankruptcy and was forced to apply for public assistance following the Great Recession. “[Applying for public assistance] was so hard and such a pride thing, raising four kids and not knowing where and when your next meal will be.”

This year, Wendy expected to turn a profit on her business. The pandemic changed that. While her family is stepping in to help, she doesn’t have a true staff to manage; therefore, she didn’t think she qualified for the Paycheck Protection Program. She did receive a small business loan which will help to keep the business afloat a couple of months, and she was able to collect $182 a week in unemployment insurance, on top of PUC (which expired at the end of July.) The extra $600 was the difference between being able to survive and falling on even harder times, she said, adding that small business owners should receive more support during this crisis.

“They’ve left us out in the cold … particularly for business owners who have no employees but [still] pay taxes. I still have to pay the rent for my building; and that’s like trying to take blood out of a stone,” she says. “With stimulus out the door, and my business not up and running, it'll be a struggle to survive.”

The "Lasting Damage" of the Pandemic

U.S. Federal Reserve Chairman Powell warned about the “lasting damage” the pandemic can have if fiscal and monetary policymakers don’t step in to mitigate the downward slide in our economy. While the stakes are high for everyone, he has acknowledged that they’re even greater for vulnerable, marginalized communities. Some economists and advocates are concerned that the damage is already too difficult to repair. Some jobs are not going to come back. Entire industries may never fully recover. The existence of certain jobs may disappear. Industries such as travel, entertainment, fitness, and restaurants may not return to normal.

“Low-income households have experienced, by far, the sharpest drop in employment, while job losses of African-Americans, Hispanics and women have been greater than that of other groups,” Powell said in testimony before the Senate Committee on Banking, Housing, and Urban Affairs. “If not contained and reversed, the downturn could further widen gaps in economic well-being that the long expansion had made some progress in closing.”

The longer the pandemic and current recession persist, the deeper the wounds will be for communities of color. Among Black workers alone, they have never experienced full employment, said Janelle Jones, managing director of policy and research at Groundwork Collaborative.

“A huge primary need is helping [policymakers] understand the facets of racial gaps, in terms of access,” said Jones, who co-wrote a recent report, “The Impact of the COVID19 Recession on the Jobs and Incomes of Persons of Color.” In the report, she and economist Jared Bernstein have called on the U.S. Federal Reserve to target monetary policy not only on the overall unemployment rate but the Black unemployment rate — delivering more racial equity.

Following eight years of working in luxury retail and more than 20 years in finance before that, Francis is considering retiring in September. “I can’t do this anymore,” said Francis, 65, who has been furloughed since March.

It’s not a rash decision, he said. He remembers the struggles he faced following the Great Recession, spending four years hunting for a job in finance. He was forced to make a switch into luxury retail, offering lower pay. But for him, “I got peace of mind,” he said.

Amid the pandemic, he has waited nearly four months for just the first unemployment payment from New York State’s Department of Labor. That’s after spending the better part of a month struggling to access the state’s website and unemployment claim assistance line for help with his application. When he finally received a notification from the state, it was a letter that arrived in late May stating he had been approved. Since then he’s received others reminding him to recertify for his benefits which he’s done each passing week.

“But there’s no payment. Nothing—it’s very frustrating,” he says. Because the state’s unemployment offices were closed, “there was no one you [could] go to and plead your case. I've never seen anything like this.”