A recent report in USA Today argued that the recession's scars will linger long after the economy heals:
The aftershocks from deep recessions reverberate for years, even decades, and take an enduring toll on everything from government finances to countless upended individual lives.
"People assume once the recession is over, people go back to work. They don't quite get the long-lasting impact," says economist John Irons of the Economic Policy Institute in Washington, D.C.
What Irons calls "economic scarring" will long serve as a reminder of the 2007-09 recession.
Millions of workers who've lost their hold on the labor market are seeing their incomes reset to a permanently lower level. Young people who entered the workforce this year can expect to earn substantially less during their careers than those who start work during booms.
As state and local governments slash spending, some children will lose educational opportunities, including the chance to attend college.
Others will be weakened by untreated physical and mental illnesses.
"We live in a big, dynamic economy, so some people will reinvent themselves. But a significant minority will have permanent, lasting earnings loss. They'll have to relocate, and some will see real turmoil," says economist Lori Kletzer, an expert on the labor market at the University of California-Santa Cruz.
For millions of Americans, the recession will bend the trajectory of their lives in unexpected ways.
But it isn't just the future that will be affected, of course. The evidence suggests that people have been rethinking old habits and adopting new approaches ever since the financial crisis began. In "17 Ways Consumers Are Changing," U.S. News & World Report details many of those shifts, based on economic data, market-research studies, and reports from the customers themselves:
Less credit, more cash. Consumer borrowing has fallen by record amounts, as Americans pay down debt and adjust to banks lowering their credit card limits. Credit card spending dropped sharply in early 2009, moderated, then started plunging again. But overall spending hasn't fallen quite as much, which suggests more people are paying for purchases in cash. "I try to use money (not credit) for clothing, basic home equipment, and gifts," says Margaret Jorgensen of Ste. Genevieve, Mo. "I don't want to pay 18 percent interest on a pair of shoes or underwear!"
The end of the monthly payer. Many consumers used to be comfortable piling up debt as long as their income could cover the monthly payments. No more. "The era of unbridled, debt-financed consumer spending is over, and the monthly payer is out of action," Eric Janszen, president of iTulip, a finance-advisory firm, wrote in Harvard Business Review last year. As consumers focus more on their total debt, they'll probably buy less and shun high-priced status symbols. But they'll still spend on certain things. "Messages that center on family, life simplification, and getting back to basics will appeal," says Janszen.
Greater suspicion. Banks wrecked the economy, then cut lending and raised fees. The government prevented a depression, but not before giving billions to Wall Street titans. Stock prices are surging while jobs disappear. The past few years have been a Great Letdown, among other things, with polls showing that Americans' confidence in banks, big business, and other pillars of the establishment is at record lows.
More resourcefulness. If you can't count on anybody else, then you're likely to rely more on yourself. Americans are taking more responsibility for their own finances and careers, undertaking more do-it-yourself projects, and learning how to cook at home instead of eating out. Travel spending is down, but sales of camping gear are up. Savvy workers are taking more midcareer courses to keep up with turbulent times.
Less brand loyalty. Millions of consumers traded down to store brands over the past couple of years—and many plan to stick with them. The quality of off-price products has turned out to be better than expected, so there may be little reason to pay more for brand-name goods with essentially the same quality. "The shift of consumers away from more expensive products is a widespread trend," declares a 2009 report from consulting firm McKinsey.
Smaller is bigger. It goes without saying that many things are getting smaller rather than bigger, including household budgets and people's ambitions. "Smaller things now make the bigger statement," says the Futures Co., a market-research firm. "Smaller portions, smaller houses, smaller cars, and local communities."
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