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Economy & Business

5 Years After Financial Crisis, How's The Job Market Doing?


You're almost to the weekend. It's MORNING EDITION from NPR News. I'm Steve Inskeep.


And I'm Renee Montagne. This Sunday will be the fifth anniversary of the collapse of Lehman Brothers, which was at the time one of the nation's leading banking institutions. That big bank failure triggered a global financial crisis and led to the Great Recession. To talk about how the economy is doing now, five years later, we turn to David Wessel. He's economics editor of The Wall Street Journal. Good morning.

DAVID WESSEL: Good morning, Renee.

MONTAGNE: Well, why don't we start, David, with the job market? Which is not doing so well, is it?

WESSEL: No, it certainly isn't. The unemployment rate is at 7.3 percent. Now, that's down from the 10 percent peak that we saw at the worst of the crisis, but it's at a level that would have been considered a recession at any earlier time. And that number overstates the health of the job market because so many people aren't looking for work, so they're not counted as being unemployed.

Now, the economy is creating jobs. That's certainly better than the alternative, but we have about two million fewer jobs than we did before the crisis - and the population has grown a bit since then. Economists say that it will probably be 2017 before we get back to what they consider full employment. And in part because there are so many workers looking for jobs, wages have been essentially flat, barely keeping up with inflation.

MONTAGNE: And that can't be good for the typical American household.

WESSEL: That's right. So if you adjust for inflation, the latest estimates are that the income of the household at the statistical middle of the middle class is five percent below where it was in September 2008. Now, thanks to rising stock prices, rising home prices, the collective wealth of American households has recovered but it's still not back to where it was.

Housing prices fell about 30 percent from the peak. Now they're beginning to rise again but they're nowhere near where they were. The good news is that households have shed a lot of their debt - some by paying it off, the old fashioned way of getting rid of it, some by walking away from it. So in that respect many people are in better financial health than they were five years ago.

And that's maybe why they say they feel better in consumer sentiment surveys and why auto sales have been particularly strong.

MONTAGNE: We also just mentioned the stock market. We have seen quite a contrast there during this time.

WESSEL: We certainly have. The Dow Jones Industrial Average went from a peak of about 14,000 in 2007 all the way down to 6,600 in 2009. Now it's recovered all that last ground and then some. It's above 15,300 yesterday. Now, it's been helped by a couple of things. One is that the fears that we're going to have another Great Depression have dissipated.

A second is that corporate profits have done pretty well and their business has improved some, both here and over sees. And then finally, the Federal Reserve has kept interest rates very low and that's chased a lot of people with money out of other investments into the stock market.

MONTAGNE: So business has done rather well over the past five years.

WESSEL: Yeah. That's kind of interesting. So what happened, I think, is that wages have been flat. So that's good for companies. Interest rates are very low and companies tend to borrow, so they're very low. Sales are up, as I said, both domestically and until recently they were doing pretty well selling to emerging markets. So by any measure, corporate profits have done extremely well lately.

It may be that they're at peak. As a share of the economy, they're bigger than they have been in some time. And it's not only the companies that make things or provide services; the very banks that helped get us into this hole are doing pretty well also. Their shares are up. Their interest rates margins have gotten a little better.

Now, there are some signs of weakness there, but I think it's what contributes to so much of the resentment that you still see about the rescue of the banks five years ago. It sure looks like Wall Street got rescued but Main Street is still waiting for the life preserver to show up.

MONTAGNE: All right. A mixed economic picture five years after the collapse of Lehman Brothers. Thanks very much, David.

WESSEL: You're welcome.

MONTAGNE: David Wessel is the Wall Street Journal's economics editor. Transcript provided by NPR, Copyright NPR.