Economic Downturn and Families

A recession is a sustained economic contraction. Consumers consume less, businesses invest less, the government spends less, and foreigners buy fewer U.S. products. Job losses follow for an extended time, which further erodes economic activity and directly impacts family well-being.

[Page 347]Family incomes used to increase when a recession ended, but that has not been the case since the early 1990s. Income continued to fall after recessions ended in 1991 and 2001. The output recovery did not translate into a labor market recovery, as was the case in recoveries before 1990. Instead, corporate profits saw a stronger-than-usual recovery.

There may be a continued disconnect between output and incomes after the 2008 downturn. Economic growth resumed in the third quarter of 2009, and nonfinancial corporate profits started to ...