Wednesday, October 15, 2008

Hello recession, goodbye paycheck

Ready to say buh-bye to your stellar paycheck and/or sweet bonuses every year? If your answer is "no" (like any capitalistic vixen would aptly retort), then check your Chanel at the door and fasten your seatbelts. It's going to be a bumpy ride.

The next phase we're entering in this economic downturn is the one of the slumping paycheck. If businesses cannot secure lines of credit easily, they begin laying people off. Less employees means less production. Less production means less revenues for businesses which -- wait for it -- means less and smaller raises, with the possiblity of nil bonuses. Oh yes, and this is while the price of goods like groceries, gas, apparel, etc. is rising. Pay down, prices up. Got it?

Pressing forward, this pay slump is supposed to be the worst since the Great Depression. (Ugh, I hate using the "GD" term -- it sounds so theatrically menacing.) Even though it won't be as bad as the slump experienced during the good ole GD, it will be (and probably already is, for many of you) like nothing else you've ever financially experienced.

Talk about stagflation: Median household income ("the middle" of the income distribution) is forecasted to be lower in 2010 than it was a decade ago. Yes, folks, it seems we aren't progressing, but rather regressing, like an eerie plot line in a Ray Bradbury novel. This regression hasn't happened since the 1930s, where the indebted were faced with the lone option of setting up shop in a shanty town and living off canned beans. Already, median pay today is slightly lower than it was in 2000, and by 2010, could end up more than 5% lower than its old peak.

Falling pay will weigh on economic growth, living standards and consumer spending for most -- except of course, for the cast of The Hills, who collectively buy designer loot with the same ease as I do grazing in the Dollar Days section at Target. (Curse you, Heidi Montag! I deserve that Hermes bag more than you do!)

And if you think we've seen the worst of it -- a "bottom," if you will -- you ain't seen nothing yet!

“The biggest hit will be in 2009,” Nariman Behravesh, the chief economist of Global Insight, a research and forecasting firm, told The New York Times, “and it probably won’t be until 2011 until we see any kind of pay gains.”

I guess the good news is that prediction buys us a bit of more time to save up, right?

6 comments:

kokostiletto said...

oh no! good thoughts and prayers to everybody i hope you keep your jobs!

Revanche said...

Ugh. Worst. Timing. Ever. Just when I've been ramping up my job search efforts, I can't be sure that I should jump to a new job knowing that businesses are going to lay off the new people first. Well, ok, toxic environment = yes, keep looking, but it's just a tad frustrating to know that this is going to royally mess with my plans to move forward.

Emilita said...

Damnit.

Budget Mama said...

It's definitely tough times!

Crystal said...

I know guys, it really sucks. Sigh. Everyone I know who is unemployed is having a horrible time finding a job. The worst of all is that it's going to take so long to emerge from this slump!

Abigail said...

Crystal,

Just wondering: The reports I've heard all say the same thing as you essentially, but stress that the figures are taking inflation into account. Is that what you heard?

Because if that's true, at least people don't need to look forward to pay cuts.


Still unpleasant, to be sure, and still harsh financially, as inflation means our dollars don't go far. I guess I'm just wondering if you've heard predictions of actual pay decreases (which I suppose is still better than layoffs).


The one strange comfort in all this is that Tim and I are so far down on the food chain (financially) that we're pretty recession proof. Who'd have thought being poor was the way to go?

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