The aftermath of the Great Recession: Financially fragile families and how professionals can help

The aftermath of the Great Recession: Financially fragile families and how professionals can help

Pam Bennett

Assistant Professor
University of Central Arkansas


This article is an overview of the recent economic trends regarding the recession spanning from December 2007 to June 2009, commonly referred to as the Great Recession. The article focuses on the changes in home ownership, employment, household debt and wealth and ways that professionals can help financially fragile families. Each of these areas has greatly affected individuals and families, and they are in need of caring professionals who are well educated on crisis as well as intervention techniques. Information in the article is designed to illuminate the magnitude of the crisis and ways to make improvements. Areas of education and tools to help professionals serve families and individuals are highlighted.


recession, Great Recession, foreclosures, unemployment, debt, economy


As reported by the Pew Research Center (Taylor et al. 2010, 1), “Of the 13 recessions that the American public has endured since the Great Depression of 1929-33, none has presented a more punishing combination of length, breadth and depth than this one.” This “Great Recession,” as it has been named, has presented major difficulties to families across the nation. Although the recession officially ended in June 2009(The National Bureau of Economic Research 2010), the effects on families still linger and many are wondering if it really ended and when they can expect to feel better. Continuing concerns include the areas of housing, unemployment, financial management challenges surrounding household debt and wealth, and the effects of financial stress on personal relationships.


Widely held as a primary factor in the December 2007-June 2009 recession, the housing market has experienced massive home foreclosures. From January 2007 to December 2011 there were more than four million completed foreclosures and more than 8.2 million foreclosure starts (Blomquist 2012). However, foreclosures are not the only problem in the housing market. Because of the larger-than-normal number of houses on the market, a number of which are foreclosures, the value of houses in many areas of the country has declined. In 2010, 48 percent of Americans surveyed estimated that the value of their home had dropped during this recession (Taylor, et al. 2010). For many Americans, home equity represents a substantial part of their family’s wealth; therefore a decline in home values has far reaching impacts on the typical family’s net worth. In a comparison of family finances between 2007 and 2009, the Federal Reserve (Bricker et al. 2011) found that families who saw a decrease in the value of household assets at a rate greater than 10 percent had a median decrease of 13.1 percent of their home equity within those two years alone.

Problems commonly associated with home foreclosure include increased crime, loss of tax revenue for communities, and stress and instability for youth and families. As a result of the stress and instability, youth and families have experienced difficulties in academic performance as well as behavior and health problems (Christian 2007; Duffield and Lovell 2008).

Professionals seeking to help families with housing issues can educate their communities. The Board of Governors of the Federal Reserve System (2009) has established a list of consumer resources that includes information on avoiding foreclosure and foreclosure scams, along with links to several government agencies and programs concerned with the mortgage crisis. One program, the Making Home Affordable program, is actually a set of foreclosure prevention programs available to Americans whose home value or income has dropped and who are unable to continue making mortgage payments under the original terms. Some of the programs require that consumers be current, and others are provided for those who are delinquent or are in danger of becoming delinquent. Some of the modifications include refinancing at better rates, reducing principal on mortgages for property that has experienced a significant decline in value, reducing payments to be no more than 31 percent of the homeowner’s income, and negotiating a short sale of a property after which the homeowner will not owe a deficiency balance and which will not damage their credit rating as much as a traditional short sale. Unemployed homeowners may even have the ability to have payments suspended for up to twelve months

It is always best if a consumer contacts the creditor before missing a payment, but even after payments have been missed, options are available to a homeowner who wants to keep his or her home or even to those who have decided they can no longer afford to keep their homes. The Homeowner’s HOPE hotline and the US Department of Housing and Urban Development (HUD) offer free housing counselors nationwide. Counselors are available to explain the law to consumers, help consumers organize their finances, analyze their options, and represent the consumer in negotiations with lenders. Counselors can be found by calling 1-888-995-HOPE or on-line at Consumers are encouraged to work with the mortgage provider first, but there are multiple options for receiving help if they have trouble doing so.

In February 2012, a $25 billion dollar settlement was reached by 49 state attorneys general, the federal government, and the five largest mortgage providers in the United States to make restitution for damage done to consumers and states when foreclosure regulations were not properly followed (Lehman n.d.). If their loans were incorrectly foreclosed, consumers may be eligible for current loan help or for a rebate payment. More information is available to consumers at


The unemployment rate topped out at 10 percent in December 2009 and has reduced only slightly, to 8.6 percent in November 2011 (Bureau of Labor Statistics 2011). In addition to the 13.3 million unemployed, there are 8.5 million who are employed part-time for economic reasons. The long-term unemployed – those out of a job for longer than 27 weeks – accounted for 43 percent of the unemployed. There are 2.6 million who are marginally attached to the workforce. These people wanted to work and were available for work, but they had not applied for a job in the last four weeks because they were discouraged or attending school or family obligations(Bureau of Labor Statistics 2011). Pew also found that in addition to unemployment, 55 percent of workers had experienced a work-related problem, such as decreased hours or pay since the recession began (Taylor, et al. 2010). The likelihood of finding employment decreases the longer a person is unemployed. According to the Brookings Institution (The Hamilton Project 2012), the likelihood of replacing a lost job decreases steadily as time passes. Just over 20 percent of the unemployed find work within the first three months, but less than ten percent finding work after one year.

Job creation has continued at a slower than anticipated rate. One estimation by the Hamilton Project at the Brookings Institution is that reaching the pre-recession employment rate would require the creation of 208,000 jobs per month for the next twelve years (The Hamilton Project 2011a). The estimate, 208,000 jobs per month, represents the average number of jobs gained per month during the best year of job creation in the 2000s. In addition, researchers have found that when the unemployed find full time work, they often do not return to their full earning capacity prior to their job loss. Even after two years of re-employment, on average workers are earning 17 percent less than they made prior to their initial job loss (The Hamilton Project 2011b).

Education is an underlying factor in the protection from the risk of unemployment, and a large number of the jobs being created require an education. The largest employment declines are projected to be in areas that do not require post-secondary education (Bureau of Labor Statistics 2011). “For less-educated workers, the Great Recession has only exacerbated a longer-term trend of diminished earnings and job opportunities(Looney and Greenstone 2011).” The Bureau of Labor Statistics estimates that nearly half of all new jobs created from 2008-2018 will require a post-secondary degree. The healthcare industry accounts for half of the anticipated fastest growing occupations, and twelve out of twenty require a minimum of an associate’s degree (Bureau of Labor Statistics 2009). There is a growing trend toward postsecondary education among non-traditional students. The number of students ages 25 and older has grown at a greater percentage than that of traditional-age students over the past decade and is expected to continue doing so. The US Department of Education predicts an increase of 9 percent among students under the age of 25 between the years 2010 and 2019, and an increase of 23 percent for students age 25 and over (National Center for Education Statistics 2011).

Professionals interested in helping combat the effects of unemployment would serve families well by providing trainings focused on such skills as resume writing and interview readiness. Also valuable would be providing information about educational opportunities available and the means to pay for such education. Many people have limited experience with post-secondary education. They may be intimidated and make false assumptions about the costs. Providing non-biased information about the costs, requirements, and sources of financial aid in a non-threatening community environment could be some of the most beneficial instruction offered. Trends in College Pricing, published by the College Board (, is a credible source for the cost of colleges and universities. Information on financing options and tax incentives for postsecondary schooling can be found in the Trends in Student Aid report (, also published by the College Board. Admissions and financial aid offices of local colleges and universities would also be a great resource for this information.

Financial management of debt

Household debt continues to be problematic, although Americans are making improvements to their financial well-being. At the end of the third quarter of 2011, the amount of US consumer revolving debt, primarily on credit cards, was $793.4 billion. This was actually a decrease of almost 20 percent from 2008. In addition, Americans owed $1.67 trillion in non-revolving debt such as auto, boat, and student loans(Federal Reserve Bank 2011); this was an increase of $66 billion. The household debt service ratio, which compares debt payments to disposable income, has decreased from 13.89 percent at the beginning of the recession, to 11.09 percent in the third quarter of 2011 (Federal Reserve Board 2011). Ideally, consumer debt payments should be kept under 15 percent of disposable income, so this figure indicates that families should be feeling less financial stress.

Consumers are slowly gaining more control over their finances. The default rate on all loan types showed decreases by an average of 59.7 percent between May 2009, the month with the highest default rate during the recession, and November 2011 (Standard & Poor’s/Experian 2011). The number of open credit accounts is also on the decline. There has been a 23 percent reduction in open credit card accounts between the second quarter of 2008 and the third quarter of 2011 (Federal Reserve Bank of New York 2011).

Good money management skills are essential, and professionals need to actively teach those principles. Principles such as budgeting, emergency savings, efficient consumption, and protecting credit in tough economic times are very beneficial. Periods of economic recession and the months following may open windows of opportunity and renewed community interest for professionals to help families learn good money management skills.

Budgeting tools are readily available in Extension resources as well as on-line, in print, and even in smart phone applications. Although most people know that an emergency savings fund is a smart idea, only slightly more than half actually meet the recognized standard of having a minimum of three months of expenses in liquid assets. On average, 43.1 percent of Americans live in liquid asset poverty, meaning that they have less than three months savings(Corporation for Enterprise Development 2011). Presenting families with ways to decrease their spending through efficient consumption would be a start in helping families live within their budgets and find money to bolster savings.

Not all Americans know about their ability to receive a free credit report from But in today’s economy, it is absolutely necessary for consumers to be aware of what their credit reports say, how that information affects them, and what they can do to make improvements. As consumers access their credit reports, a number of them may discover that they are victims of identity theft. The Federal Trade Commission estimates that as many as nine million Americans have their identity stolen each year (Federal Trade Commission n.d.). Consumers reported a cost of more than $1.7 billion in 2010 (Federal Trade Commission March 2011). Learning of tools such as those on can potentially save consumers time, money, and aggravation.

Reducing credit obligations is vitally important. Using tools such as PowerPay,, a debt reduction calculator developed by the Utah State Extension Service, could make a tremendous impact on a family’s financial well-being. Families also need to be aware of services such as Consumer Credit Counseling Services that can legitimately help them reduce debt by working with creditors to lower interest rates and fees.

Loss of personal wealth

The latest economic recession has reduced the average household wealth by 19 percent between 2007 and 2009. The majority of this is attributable to loss of home and investment values and represents the largest drop in the post World War II era. About 48 percent of households say they are in worse financial shape than before the recession, and 63 percent predict it will take at least three years to recover (Taylor, et al. 2010). Knowledge of fundamental investment principles can prepare people to make wise decisions regarding their retirement plans and other investments. Often employees are expected to choose investments without being given the tools needed to make sound decisions. Professionals can educate the public on basic investment knowledge that will empower them to make choices that balance risk and return.

Financial effects on relationships

There is a strong correlation between financial difficulties and relationship difficulties. “Financial hardships and instability can foster conflict and seriously impact the stability of a couple’s relationship as well as their finances, especially when there are no rainy day funds and little knowledge of where to turn for help. On the other hand, strong relationships can act as a buffer during financial hardship (Assistant Secretary for Planning and Evaluation 2009).” For this reason, families need to be taught skills that contribute to strong relationships and resilience: good communication, productive problem-solving, principles of physical, spiritual, and emotional wellness, and stress management techniques (Smith 2005). The Department of Health and Human Services released two documents in 2009 highlighting the work currently being done and tips for practitioners working with couples. The documents, Foundations for Strong Families 101 and Foundations for Strong Families 201, serve as excellent resources and are available.

The effects of the recession on households will continue to linger and affect the lives of Americans. There is not a definitive answer to the question “When will this feel better?” To strengthen their fiscal positions and begin to feel better financially, families must live within their means, implement a savings plan, and reduce their dependency on credit. There is no doubt that people will continue to need research-based, relevant, practical education. Professionals can play a vital role in the economic recovery of our country … if we share our skills, research, and knowledge!




Assistant Secretary for Planning and Evaluation. 2009. Healthy Relationships and Financial Stability: Project Page.

Blomquist, Daren. 2012. “2012 Foreclosure Market Outlook” (slideshow). February 13.

Board of Governors of the Federal Reserve System. 2009. “Resources for Consumers.” Federal Reserve.

Bricker, Jesse, Brian Bucks, Arthur Kinnickell, Traci Mach, and Kevin Moore. 2011. Surveying the Aftermath of the Storm: Changes in Family Finances from 2007 to 2009.Finance & Economics Discussion Series, Washington, DC: Federal Reserve Board.

Bureau of Labor Statistics. 2009. “Employment Projections 2008-2018 (USDL 90-1503),” news release. Washington, DC: US Department of Labor.

—. Bureau of Labor Statistics .2011. The Employment Situation – November 2011 (USDL-11-1691). Washington, DC: US Department of Labor.

Christian, A., ed. 2007. Formula for success: Questions and answers for local leaders designing a foreclosure intervention program. Washington, DC: Neighbor Works America.

Corporation for Enterprise Development. 2011. “Liquid Asset Povery Rate.” Asset & Opportunity Scorecard.

Duffield, Barbara, and Phillip Lovell. 2008. The economic crisis hits home: The unfolding increase in child and youth poverty. Greensboro, NC: National Association for the Education of Homeless Children and Youth (NAEHCY) and First Focus.

Federal Reserve Bank. 2011. Federal Reserve statistical release: Consumer credit (G.19).Washington, DC: Federal Reserve Bank.

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Federal Trade Commission. n.d. “About Identity Theft.” Fighting Back Against Identity Theft.

———. Federal Trade Commission. 2011. Consumer Sentinel Network Data Book for January – December 2010. Report, Washington, DC: Federal Trade Commission.

Hamilton Project. 2011a. “Earnings of Workers Who Lost Their Job in the Great Recession.” Brookings Institution, November 4.

———Hamilton Project. 2011b. “Evolution of the ‘Job Gap’ and Possible Solutions for Growth.” Brookings Institution, December 2.

———Hamilton Project. 2012. “Shrinking Job Opportunities: The Challenge of Putting Americans Back to Work.” Brookings Institution, January 6.

Lehman, Phillip A. n.d. “Executive Summary of Multistate/Federal Settlement of Foreclosure Misconduct Claims.” National Mortgage Settlement.

Looney, Adam, and Michael Greenstone. 2011. “What is Happening to America’s Less Skilled Workers? The Importance of Education and Training in Today’s Economy.” The Hamilton Project, Brookings Institution.

National Bureau of Economic Research. 2010. US Business Cycle Expansions and Contractions. Cambridge, MA: The National Bureau of Economic Research.

National Center for Education Statistics. 2011. Digest of Education Statistics (NCS 2011-015). Alexandria, VA: US Department of Education.

Smith, Suzanna. 2005. Building a strong and resilient family (FCS2057). Gainesville, FL: University of Florida – IFAS Extension.

Standard & Poor’s/Experian. 2011. S&P/Experian Consumer Credit Default Indices. New York: McGraw-Hill.

Taylor, Paul, et al. 2010. A balance sheet at 30 months: How the great recession has changed life in America. Washington, DC: Pew Research Center.

US Bureau of Labor Statistics. 2010. The Employment Situation – September 2010 (USDL-10-1393). Washington, DC: US Bureau of Labor Statistics.

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