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Downturns Can Leave Americans 'Pinched' For Years

During the bleak days of the Great Depression, the nation's unemployment rate neared 25 percent, and the stock market lost nearly 90 percent of its value.

Many historians and economic analysts have drawn comparisons between that dark period and the so-called "Great Recession" that followed the collapse of Lehman brothers in the fall of 2008.

Others have looked to the malaise sparked by the 1970s oil shocks and the Panic of 1893 for lessons on navigating our way out of the current economic downturn.

But those dark moments in American history had a much wider reach than their immediate economic impact, says Don Peck, author of Pinched: How the Great Recession Has Narrowed Our Futures and What We Can Do About It.

"We think about this [2008] recession as a temporary period, where you know jobs are lost, jobs will be regained. Housing values have gone down, they'll go back up," Peck tells NPR's Neal Conan. "But periods like this one leave lasting changes on the national character, on communities ... on the character of generations."

Americans who enter the job market during economic downturns often experience the greatest fallout, Peck says. "Economic research indicates that the first few years on the job market are extremely important to stabilizing one's career path. People who come onto the job market for the first time in a bad recession not only start behind — they never catch up," Peck says.

"So there's a lifelong financial impact from being stuck and struggling early in your career, when employers are forming judgments about you."

Coming of age during a recession can also shape the character, and characteristics, of entire generations, Peck argues.

"In the Depression, famously, we came out of that with a generational shift towards thrift," he says. "The 1970s undid that. Inflation was the problem, and young boomers learned the opposite lesson: that, in fact, thrift was for fools; that debts were the thing to do; that big mortgages made sense, because inflation would eat them away."

Inflation eventually fell after the 1970s, but "that sensibility seemed to remain with boomers throughout their lives," Peck says. "From the fruit of one crisis, we've seen the seeds of another."

In contrast, Peck argues, simply being young can insulate individuals from the negative effects of economic stagnation. He cites the sociologist Glen Elder, of the University of North Carolina at Chapel Hill, who followed the lives of several cohorts of Americans in the decades following the Great Depression.

People who come onto the job market for the first time in a bad recession not only start behind — they never catch up.

Elder found that those who were in their teens throughout the Depression bore few "lasting scars," Peck says. "In fact, adolescents were counted on for more, they were pampered less." That cohort, eventually dubbed the "Greatest Generation," says Peck, developed "an orientation toward family, an ability to delay gratification, and many other kinds of socially desirable trends."

And as those young people entered adulthood, Peck says, the onset of World War II provided many of those young people great economic opportunity. "That put them in good stead for the rest of their lives."

Unfortunately, Peck says, there are no major economic drivers on the horizon that might offer those currently unemployed similar job opportunities, particularly in regions like the Midwest and the Sun Belt.

"One thing we need to do as we think about recovery from this recession," Peck says, "is to actively help people who are stuck in those extremely depressed places move to places where there are more work opportunities."

Copyright 2023 NPR. To see more, visit https://www.npr.org.

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