The stock market is again making record highs. Unemployment remains near all-time lows. Home prices have roared back since plummeting 10 years ago.
We should feel great about this economy, and we mostly do, especially with Janesville’s ability to rebound from the General Motors plant closure. New industries have sprouted in GM’s wake, downtown Janesville is experiencing a Renaissance and the area’s foreclosure crisis feels like a distant memory.
Yet, something seems to be amiss.
Locally, the statistics and anecdotes suggest poverty is a growing problem, despite Rock County’s unemployment rate near 3%. If the yearslong economic expansion is lifting up some people, it’s clearly leaving many others far behind.
What explains these discrepancies? Are the indicators traditionally used to gauge the economy’s strength giving false signals? Here are three signs the economy, both at national and local levels, is weaker than some people have advertised:
1) One of Janesville’s most familiar charities, ECHO, has been exceptionally busy this year. Karen Lisser, executive director of ECHO, said in March donations weren’t keeping up with demand for the agency’s services, which include rent assistance and hotel vouchers. Many people can’t afford rent on the wages they earn, causing more people to turn to charities for help. The high demand for ECHO’s services amid such low unemployment is troubling.
2) Small businesses, the backbone of Janesville’s economy, have been shedding jobs at the national level over the past two months. These companies get little attention on Wall Street, but they employ millions of Americans. Businesses with fewer than 50 employees cut 23,000 jobs in June after eliminating 38,000 jobs in May, according to the payroll processor ADP. In a Saturday op-ed, Frank Knapp Jr. of the South Carolina Small Business Chamber of Commerce argues the slumping employment numbers are the economy’s canary in the coal mine.
3) The Federal Reserve is widely expected to cut the federal funds rate when its board meets later this month. The last time the Fed began a rate-cutting cycle, September 2007, the housing market was starting to unravel. The Fed didn’t stop cutting rates until reaching near 0% in December 2008. Interest rates are already low on a historical basis, and it’s an open question whether a new round of rate cuts would do much to boost the economy.
Finally, we polled Gazette readers this month to gauge their feelings about the economy. The results aren’t scientific, but they were telling: By a 131-94 vote, readers said they thought a recession was looming.
Recessions are famously difficult to predict, but it’s useful to ask whether we as a community are prepared for one. If demand for charitable services is high now with record-low unemployment, what will the situation look like if unemployment rises? It’s a question worth contemplating.