Recession and Recovery: Facts and Forecasts

Contact: Stu Kantor, (202) 261-5283, skantor@urban.org

WASHINGTON, D.C., December 22, 2008—Rising unemployment, pinched household budgets, gyrating stock markets, falling home prices, frozen credit -- an economy in deep recession inflicts widespread pain.

Six new briefs from the nonpartisan Urban Institute show how Americans have fared during and after downturns since the 1970s, what might be ahead, and how government programs aid those in distress.

Among the facts and forecasts:

• It took about five years for the unemployment rate to drop back to levels preceding the 1980–82 and 1990–92 recessions. Thus, even if the current recession ends in 2009, unemployment rates may not be as low as 2007’s 4.6 percent for years to come.
• By 2007, the inflation-adjusted incomes of families among the poorest fifth of U.S. households had not recovered to their peaks on the eve of the 2001 recession.
• The share of unemployed workers receiving unemployment insurance benefits was regularly as high as 60 percent in the early 1970s, but it has remained at about 40 percent for the last two decades.
• If the recession deepens, Congress may need to tap into the Temporary Assistance for Needy Families’ $2 billion contingency fund, consider increasing TANF’s $17 billion annual budget, and relax the program’s work-participation rules.
• Overall, the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) is well designed to aid families hit hard by a recession. But enrollment could drop among unemployed able-bodied adults without children, the only group whose benefits have time limits.
• Although the earned income tax credit, the largest cash assistance program for low-income working families, successfully encourages work, particularly among single mothers, it is an unreliable safety net during times of rising unemployment and reduced incomes.
• Each 1-percentage point rise in the national unemployment rate can be expected to increase Medicaid and State Children’s Health Insurance Program enrollment by 1 million people (600,000 children and 400,000 nonelderly adults). A 1-point jump would also raise the number of uninsured adults by 1.1 million.

The “Recession and Recovery” briefs -- covering unemployment rates and income, unemployment insurance, welfare, food assistance, the earned income tax credit, and Medicaid and children’s health coverage -- can be found at http://www.urban.org/projects/recession.cfm.

For more on the challenges facing vulnerable households and ways to help them, see “A New Safety Net for Low-Income Families,” available at http://www.urban.org/projects/newsafetynet/index.cfm

“Recession and Recovery” will be discussed at the Urban Institute January 6 during a First Tuesdays forum on jobs, the recession, and special populations. Asset building and economic security will be the focus of a New Safety Net forum on January 13. To receive more information soon about these events and their webcasts, sign up at http://www.urban.org/events/index.cfm.

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