Joblessness, Poverty Outlast a Recession

IT'S no secret that a recession - even a ``moderate'' one - brings economic misery. What may not be so commonly recognized is that the ``end'' of a recession does not mean an immediate end to higher unemployment, greater poverty, and other economic hardship. ``The point at which a recession ends is the point at which the economy is at its lowest ebb, not the point at which economy has fully or partially recovered,'' note economists Isaac Shapiro and Robert Greenstein in a study for the Center on Budget and Policy Priorities, a Washington think tank.

So far the statistics do not contradict the forecast of most economists for a mild recession. The Commerce Department Wednesday said that the output of goods and services in the United States declined at a 2 percent annual rate in the last quarter of 1990, revised down slightly from an earlier estimate of 2.1 percent. That included a $19.9 billion drop at an annual rate in the output of consumer goods ranging from cars to clothing.

Most economists are saying that the gross national product will be down this quarter too. Many are counting on victory in the Iraq war boosting consumer spending quickly.

Indeed, 49 of 54 economists surveyed by the National Association of Business Economists agree with the Bush administration that a modest level of economic growth will return by midyear. There is some anecdotal evidence already of a pickup of activity in real estate offices, auto sales rooms, and retail stores. But the statistics don't show it yet.

``It is going to take the economy some time to get back on the track it was before the recession,'' Mr. Shapiro says.

Unemployment will probably peak when the recession officially ends. But long-term unemployment might not peak until six months later, if it follows the pattern of the 1981-82 recession.

Other points Shapiro and Mr. Greenstein make:

Under the Bush administration forecast, the average unemployment rate in fiscal year 1992, starting next October, will be slightly higher than the average rate in fiscal year 1991 (6.7 percent vs. 6.6 percent).

The unemployment rate will not return even to its January level of 6.2 percent until the second half of 1993.

Unemployment will not return to the pre-recession levels of last spring until 1996.

The number of Americans living in poverty, as officially defined, will be several million greater in 1991 than the 31.5 million in 1989 (the latest data).

Income disparities between rich and poorer Americans, already enlarged in the 1980s, are likely to widen further because of the recession. When unemployment rises, the poor get hit hardest economically.

At the moment, with the victory in the Middle East, the Bush administration is riding high in public opinion polls. But, notes Shapiro, ``the public will refocus on the domestic agenda over the next month or two.'' And that focus will be on rising unemployment, greater poverty, and increased business troubles.

Even though economic activity may actually be picking up, many people will not feel prosperous again until well into 1992 - an election year. That is why the Bush administration is keen to have the Federal Reserve System ease monetary policy further.

``There is more that could be done than only monetary policy,'' says Shapiro. He urges Congress and the president to take some ``limited measures'' to ameliorate the hardships. One step would be for the federal government to enact a program of supplemental unemployment benefits that would be fully federally funded for those long-term unemployed workers who have exhausted their regular benefits and are still looking for work.

This, guesses Shapiro, might cost $3 billion to $5 billion. That sum is small potatoes compared to the cost of the war.

Rep. Thomas Downey (D) of New York is expected to introduce an unemployment insurance reform bill next week.

The Shapiro-Greenstein study makes some other suggestions costing several hundreds of millions regarding affordable housing, health care, and food assistance.

Would President Bush veto any such limited measures? Considering the political risks, he may not, says Shapiro.