Why has unemployment remained stubbornly high?

Washington Post opinion writer Robert Samuelson has the answer:

“We have gone from being an expansive, risk-taking society to a skittish, risk-averse one.”

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

Before the financial crisis, he says, Americans were inclined to spend. It was all about immediate gratification. Banks offered loans. Businesses hired and invested. A growing economy supported optimism, which, in turn, supported a growing economy.

Now spending freely is out. Consumers are averse to spending and inclined to save.

The personal saving rate dropped from 10.9 percent in 1982 to 1.5 percent in 2005, Samuelson notes. Since the financial crisis, it’s been increasing and averaged 4.4 percent 2010 to 2012. Businesses are also disinclined to spend.

It’s largely psychological, he writes. Traumatized by the unexpected financial crisis and the following recession, Americans are trying to accumulate savings to protect themselves against the next crisis.

Where free-spending optimism ruled during the boom years, miserly pessimism prevails.

“We are hostage to a stubborn, restraining psychology,” he states. “There’s no obvious fix for slow job growth, precisely because it requires a change in public mood or some autonomous source of added demand — a burst of exports, investment in new technologies — not easily predicted or controlled.”

Unemployment is officially 7.9 percent but would be 14.4 percent if it included part-time workers who want to work full-time and discouraged workers who have stopped looking.

The Congressional Budget Office doesn’t expect it to fall below 7.5 percent until 2015. “That would make six years above 7.5 percent — the longest stretch of high joblessness in 70 years,” he notes. “It has defied massive budget deficits and ultra-low interest rates.”

One theory is that the economy won’t really accelerate until American consumers have deleveraged, this is, pay down debt.

Consumer spending may have increased somewhat recently, but it’s not clear if a significant spending increase is a long-term trend.

“Part of this story, beyond this month or this quarter, is the new austerity within the consumer market — both paying off debt and building up savings. That’s not going to go away,” Ken Goldstein, an economist with the research group Conference Board, tells McClatchy Newspapers. “It may ease up a bit, but we’re not going back to pre-Great Recession. That world is done.”

The consumer debt ratio fell from a high of 14 percent in 2007 to 10.6 percent in 2012, according to Federal Reserve data cited by McClatchy.

“The wounds of 2008 and 2009 may be four or five years ago, but they’re still fresh. There are still many people unemployed or underemployed,” Susan Reda, editor of STORES, a trade magazine for retailers, tells McClatchy. “We’ve turned a corner, but they don’t think they’re on easy street.”

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown