[Economy]

Two Economies?

Here's how economists put the news:

Consumers' income, spending and confidence registered drops in August, dragged down by the twin blows of Hurricane Katrina and rising fuel prices.... August's personal income fell by 0.1 compared to July, reflecting mainly a $100 billion loss to landlords because of uninsured hurricane damage, the Commerce Department reported Friday.

All of which, I've no doubt, is true. Economists have sophisticated ways of tracking vast columns of numbers, and if I asked my friend, who's an econ prof, he'd tell me how they do it.

When you look at the whole economy, you arrive at fairly clear findings about how its contracting or growing. Based on these numbers, economists believe there's a growing--but still small chance--that the eonomomy will slide into recession. But I think we are already in a recession, and have been for years--at least for the bottom 20% or more of the income scale.

I do research on the Oregon child welfare system, and we've begun data collection on a project that looks at one particular intervention caseworkers use with families in the system. It's similar to a project I worked on that started about 8 years ago--the families we're interviewing look roughly the same and have a similar level of seriousness with regard to the allegations of abuse and neglect. The funny thing, though, is that we're having a very hard time getting our sample--so many of the families are homeless that we can't track them down to do interviews. The population is roughly the same as it was eight years ago, but the destitution appears far worse.

In research, there's a phenomenon called a "bimodal distribution" that can really mess with findings. If you're doing a scaled survey, say, and the answer categories are coded 1-5, and you come up with a mean (average) and median (half above, half below) of 3, you might expect that you're dealing with a standard bell cure. But with a bimodal distribution, you have two groups clustered on either side--one group giving very positive answers, one very negative answers. And the resulting mean and median is ... 3. Without teasing out those findings, your analysis could be exactly wrong--you might say that, with a mean score of 3, people are mostly neutral to whatever it is you're asking them. In fact, they're anything but--you have no one who's neutral.

It's easy enough to see these results on a single scaled item. When you're dealing with information as sophisticated as the US economy, surely it's not nearly as easy. So are we really dealing with an economy just slightly teetering, or is it actually the case that the bottom group, who have been grinding along in desperate straights for years, are now starting to fall off the cliff? I have no way of knowing (and my experience with families in the child welfare system is purely anecdotal--we're not studying poverty), but I'd guess the latter.