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“This economic downturn is affecting more people than just those who have the least among us, and that’s what is making everybody so uncomfortable,” says Jessica Gordon Nembhard, assistant professor and economist at the University of Maryland, College Park, and a member of the BLACK ENTERPRISE Board of Economists. “It’s slowly trickling up.”
Indeed, the question for most people is no longer whether we’re in a recession, but rather how long it will last. If you’ve tried to sell a home, find a job, or invest money in the stock market, you know the economy is slowing down. And at this point, it’s hard to tell when it will revive.
A recession is generally defined as two consecutive quarters of a decline in gross domestic product but is offically declared by the National Bureau of Economic Research. By most accounts, economic growth began to falter in the first quarter of 2008, but it’s technically too soon for an official declaration.
“The main cause of the recession was the bursting of the housing bubble,” says Jared Bernstein, senior economist with the Economic Policy Institute, a labor-oriented research group in Washington, D.C. “That creates a pretty long-term mess, which is going to take a long time to mop up.”
Government stimulus packages may not be enough to help. The Federal Reserve’s series of interest rate cuts are butting up against tighter credit standards. And the tax rebate checks mailed in the past month are probably too small to make much of a dent. “People will probably use the rebates to pay off credit card debt or save,” Bernstein says. “While those are important and necessary, they don’t give the economy much of a bang in the short term.”
The last two recessions, in 1990 and 2001, were shallow and short, each lasting less than a year. If the economy did slip into recession last December, as many observers believe, then a recovery could be under way soon. Yet, history is instructive to a point. The recession of 1982 lasted 16 months, about twice as long as the recessions of ’90 and ’01. On average, recessions since 1945 have lasted 10 months.
For black people, economic downturns often cut deeper, in terms of job losses and business survival. “We’re the first to fall back when a recession comes and the last to recover when it ends,” Gordon Nembhard notes.
The turning point is likely to be a stabilized real estate market. “We expect home building to bottom out the middle of this year,” says Gus Faucher, director of macroeconomics with Moody’s Economy.com. “And we expect home prices to bottom [out] at the end of ’08 or early ’09 because there’s still a lot of excess inventory in the market.” That should be welcome relief for homeowners, who have about 32% of their net worth tied up in home equity.
Until then, use some of the tips we’ve outlined to get through this challenging time.
It is said that a recession is when your neighbor loses his or her job, but a