Despite economy's gains, many families must live in recessionary mode

6/12/2011

CHICAGO -- Two years into the recovery, layoffs have leveled off, jobs are being created, and the economy is expected to keep growing.

Yet many families are still struggling as if they were in a recession.

In Chicago, Jeanette Taylor-Smith skips a bill payment to buy shoes for her children. Every month, Abraham Duenas reassesses whether he can keep his coffee shop running. And Leticia Moreno is still finding ways to cut her grocery bill by buying less meat and skipping the organic aisle.

It's like recovering from a massive heart attack: People are alive, but they are not doing well, said Diane Swonk, chief economist at Mesirow Financial.

There are signs of hope. Companies have slowed layoffs to pre-recession levels, and Ms. Swonk expects exports to remain strong and business investment to increase on the heels of robust orders.

Still, unemployment rose in May to 9.1 percent, those who are employed are working more for the same salary or less, and the public sector continues to shed an average of 23,000 jobs a month.

Although the economy added 244,000 jobs in April, only 54,000 jobs were added in May.

Those numbers are not enough to make a dent in the 11 million-job shortfall, said Heidi Shierholz, an economist with the Economic Policy Institute, a labor-oriented think tank based in Washington.

Ms. Shierholz said economic indicators show the private sector is "not poised to take over with robust growth." For instance, the Institute for Supply Management's manufacturing index dropped to 53.5 last month from 60.4 in April, she said.

"Whatever momentum we had, it is really slowing down," she said.

For the unemployment rate to return to 5 percent in three years, she explained, the economy would need to add about 400,000 jobs a month, which is unlikely to happen.

"We are still in a very deep hole in the labor market," she said. "We [have] barely started to dig ourselves out."

Although the economy is growing and jobs are being created, nearly 14 million people are unemployed. About half have been unemployed for more than six months, according to the U.S. Department of Labor. Ohio has 500,000 unemployed, including 20,000 in Lucas County, and Michigan has 630,000 jobless.

Among the unemployed nationally is Ms. Taylor-Smith, who was laid off from her retail job at the end of 2009. Eight months later, her husband, Greg, lost his job too. Their savings gone, Mr. Smith works odd jobs. Ms. Taylor-Smith has landed a few seasonal jobs and is paid a small stipend as a community leader with the Kenwood Oakland Community Organization.

But despite their efforts, they haven't found full-time employment. Ms. Taylor-Smith, 36, said that not having a college degree has hurt her chances of landing the managerial jobs she had before the economic crisis.

Experts say she is not alone. Competition has forced people with college degrees to take jobs below their skill level, displacing those with less education.

To stretch her budget, Ms. Taylor-Smith is walking instead of spending $4.50 on bus fare. The savings allow her to buy an extra gallon of milk at the grocery store and two loaves of bread. And instead of fresh produce, which is more expensive, she buys canned. For lunches, she packs crackers, cheese, ham, and a juice.

Such cuts affect people like Mr. Duenas. At his coffee shop, more customers are forgoing the special drinks such as the $3.45 mocha and settling for the $1.60 regular coffee.

About nine months ago, he absorbed a 10 percent increase in coffee prices, fearful that he might lose more customers if he tried to pass on the increased cost to consumers.

For the past half-year or so, he has been focused on reaching new customers. He started a morning radio show as a way to advertise his shop. He said he has noticed a slight increase in customers, but "I don't think we are out of the recession," he said. "I still see people not getting jobs."

After years of working with her husband, Ms. Moreno took a job outside the family business last year to pay the bills. The couple struggled when her husband's income fell by half as customers stopped bringing in their vehicles to his shop for repairs. Also, they sold their house and moved into a small apartment.

The savings from the downsizing provided the couple with cash to keep the shop afloat and to hold on to their middle-class lifestyle -- eating out on weekends or cooking meat at home four to five times a week. But when gas prices began to rise, they cut back on meat, and they go to restaurants only on special occasions.

"You take two steps forward and one step back," she said.