Senior Director and Senior Fellow
1. Poverty may increase by a record amount in 2009. Both the number and percentage of Americans in poverty could show record one-year increases, in data that go back to 1959. (The existing records are increases of 3.2 million and 1.3 percentage points, both in 1980.).
The expected large increase reflects the recession and the unusually high degree of long-term unemployment. Between the start of 2008 and the end of 2009, the number of jobs fell by over 8 million. Further, by late 2009, the proportion of unemployed workers who had been out of work for more than six months topped 40 percent, another record. The longer people are out of work, the more likely they are to fall into poverty.
Even worse, the current economic downturn follows an economic recovery that was the first on record in which poverty was higher — and median income for working-age households lower — at the peak of the recovery (2007) than in the previous recession (2001).
2. Thursday’s figures will omit the impact of large parts of the 2009 Recovery Act. The Census Bureau’s official poverty data account for the cash income that households receive, including unemployment benefits for jobless workers, but they leave out any assistance that families receive in the form of tax credits or non-cash benefits. So Thursday’s data won’t show the poverty-reducing impact of tens of billions of dollars’ worth of Recovery Act tax credits for low-income working families (such as the new Making Work Pay Credit) and expanded food stamp benefits.
3. Poverty will likely rise even higher next year if recovery provisions are allowed to expire. Forecasters generally expect unemployment to remain high through 2011, and poverty will likely remain high even longer than unemployment does. In each of the last three recessions, the poverty rate did not begin to decline until a year after the annual unemployment rate started to fall.
Many pieces of the Recovery Act aimed at low- and moderate-income households are scheduled to expire soon. If Congress fails to act, extra weeks of unemployment benefits for the long-term unemployed will expire on November 30, the TANF Emergency Fund jobs program will expire on September 30, and the expanded Child Tax Credit for working families will expire after 2010. If these measures do not continue, poverty — particularly as measured by an expanded poverty measure the Census Bureau will issue this fall, which includes tax credits and non-cash benefits — will likely go up in 2011.
On Thursday, we’ll post an analysis of the new data.