Fallout: The Financial Crisis

A grim prediction for unemployment

Steve Henn Oct 2, 2008
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Fallout: The Financial Crisis

A grim prediction for unemployment

Steve Henn Oct 2, 2008
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TEXT OF STORY

Kai Ryssdal: Long before anybody votes tomorrow, the Bureau of Labor Statistics is going to chime in with a reminder of the real economy. That would be the one most of the rest of us live in, not the one on Wall Street. Expectations for the September unemployment report are pretty low. So we asked Marketplace’s Steve Henn to connect the dots between the current crisis and jobs down the road.


Steve Henn: This credit crisis is already hurting consumers. Take these two women in downtown Washington.

First woman: It sucks. We don’t even rent movies. That’s how bad the economy is, for us anyway.

Second woman: I agree totally. I had to take my daughter out of private school, put her in a public school. I mean the list is endless. I can go on and on and on, and there’s nothin’ that I can do about it.

Until recently, Americans kept spending on a wave of easy credit even while real incomes fell. But economist Steven Fazzari, at Washington University in St. Louis, says that’s over.

Steven Fazzari: Consumption is starting to go down. In fact, durable consumption, consumption on big ticket items like cars and appliances, has been falling since the beginning of the year.

The effects are rippling through the job market, hitting construction, automakers and retail outlets.

Fazzari: I think the next wave is going to be when businesses are having a hard time borrowing to finance their payroll.

That means even more layoffs. If you want a peak into America’s economic future, take a look at Rhode Island.

Lara Hart: It’s a small state, so we have a smaller scale, which means we have a lot of small businesses.

State labor official Lara Hart says those businesses often feel hard times first.

Hart: Rhode Island has in other recessionary times been one of the first states to enter a recession.

In the last 18 months, Rhode Island’s unemployment rate doubled from a little over 4 percent to 8.5. That’s the second highest in the country.

In Washington, I’m Steve Henn for Marketplace.

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