MICHEL MARTIN, HOST:
This is TELL ME MORE from NPR News. I'm Michel Martin. Later, it sounds like a bad walks-into-a-bar joke, but it wasn't. Recently, a representative of the KKK had a sit-down with members of the NAACP. This took place in Casper, Wyoming. Reporter Jeremy Fugleberg was there for the whole thing, and tells us what happened. That's in just a few minutes.
But first, we want to tell you about the latest jobs numbers. They're just out from the U.S. Department of Labor. Employers added a modest 169,000 jobs in August and the unemployment rate dropped to 7.3 percent, but that's mainly because people dropped out of the labor market. Those numbers were about what analysts were predicting but we're reminded that five years ago this month, few people could have predicted what the fall would bring to the financial world.
Back in September 2008, it seemed like there was a new shocking development on Wall Street just about every day. Early in the month, the government announced plans to take over the mortgage giants Fanny Mae and Freddie Mac. In the middle of the month, the financial giant Lehman Brothers declared bankruptcy. A few days later, the massive American insurance group AIG took a government bailout, which eventually came to about $182 billion. And when the U.S. House of Representatives rejected bank bailout plan at the end of September, the Dow Jones Industrial Average fell more than 777 points - the biggest single-day loss in Wall Street history.
We want to talk about where the economy in today and how things have changed or have not changed since that wild month five years ago. We've called on people who covered it. Michael Fletcher is a national economics correspondent for the Washington Post. He's here with us in our Washington, D.C. studios.
MICHAEL FLETCHER: Good to be here.
MARTIN: And - no Rana Foroohar. OK, well, thank you. We thought we would have another correspondent, but that's not happening. So Michael, we'll - we're happy to have you. It turns out that 7.3 percent is down from 7.4 percent, but the report says that the participation rate last month was 63.2 percent, which is the lowest it's been since August 1978. So what does that tell us?
FLETCHER: It tells us that more people than ever are discouraged about their prospects in the job market. And this has been an ongoing thing throughout this recovery. While we've seen the unemployment rate steadily sort of make progress and go down, you know - it's still remaining very high, of course -a large part of that decline has been because people have dropped out of the labor force.
Young people are deciding to stay in school longer if they have that option. You know, people who are close to retirement age often are taking early retirements and that sort of thing. And other people, it's anyone's guess what they're doing. So we have a labor force participation rate that, as you said, is at a decade's, you know, low and no one quite knows kind of how to get out of that cycle.
MARTIN: So this - and of course the uncertainty in Syria or around what's going to happen in the Middle East is obviously another shock to the system. That even in the absence of any decision yet, that could have negative implications - so what is the take away here? What's the overall take away here for people trying to figure out what the next couple of months are going to bring?
FLETCHER: I think it's more of the same in the sense the uncertainty continues. Not only do you have what's happening in Syria, you have all the things on the hill. You know, you're going to have another debt limit fight, you're going to have another budget fight coming up in the next month and no one knows how those are going to be resolved. You know, people are kind of, I think, hopefully predicting that, well, of course, we're not going to have a breach of the debt limit nor are we going to have a government shutdown, but we've seen crazier things before.
You know, months before the sequestration people were saying, well, that's not going to happen because that's such a bad option for both sides. But here we are in sequestration and many people seem to have embraced that as a budget cutting mechanism. So I think uncertainty is the order of the day.
MARTIN: So let's talk about - going back five years ago. You know, five years later, what's changed? Has something changed?
FLETCHER: Well, I mean, what's changed is - sadly, I think is a lot of ordinary people have gotten out of the stock market. We've seen a big recovery in the stock market even as that's happened, and interestingly, that's fueled continued inequality in our society.
If you look at whose wealth and whose finances have recovered most since that downfall, it's been the people at the top who had more to begin with. I mean, because they had more of their money in the kind of assets that are traded on the stock exchange, ordinary people typically have their money in their homes, that's where their wealth would reside.
And what we've seen is the stock market's recovered pretty nicely. It's been a - it was a rocky ride, you know, from, say, 2008 to 2009 - it hit even a lower mark, but since then it's been making pretty substantial progress and a lot of that is due to the Federal Reserve policy.
There's been a lot of liquidity injected into our banking system. There's a lot of money sloshing around. People need to invest that money and that's raised asset prices. And it's raised home prices too but, again, that's been more on the upper-end. And you find a lot of average homes now being, you know, gobbled up by investors, you know, big Wall Street types are buying homes particularly in the most distressed markets.
So I think what you've seen, if anything, it's been kind of this continued march to inequality. It didn't just start a few years ago, but I think it's accelerated with this recovery.
MARTIN: There's been so much discussion, if you've - people who've followed these kind of discussions in Washington around the Consumer Financial Protection Bureau and there was a - like a two-year fight over getting a permanent head of that agency because the parties were fighting over how much power this new agency should have, if it was even needed and so on. So now that this bureau is in place, has something been put into place so that the kinds of - the meltdown that we saw won't take place again? I mean, I know that's only one piece of the puzzle...
FLETCHER: ...That's one piece of...
MARTIN: ...But has anything been put into place so that we are not going to see again what we saw five years ago?
FLETCHER: I think so, I mean, I don't think you're going to see the kind of mortgages that we saw, you know, the kind of thing that fed the crisis before. You're not going to see that sort of thing. But - and also, you've bankers actually err on the side - on the opposite side of the kind of thing that caused the crisis. You know, outside of the regulatory structure, bankers became very cautious about who they loan money to, how much they would loan - you know, these liar loans that come - you know, no doc loans, those kinds of things are out.
And almost, we've gone too far in the other direction and now you see the marketplace starting to moderate a little bit. So you've seen that kind of change. There's more caution, there's more sense that, you know, what these meltdowns can happen and we're going to be very cautious about who we loan money to. So I think that's the case, you know, now.
MARTIN: So overall, though, I mean, has the regulatory picture changed or not? Or are these individual business decisions that are being made by individual entities?
FLETCHER: The regulatory picture has changed, but I think the more impactful thing has been the individual business decisions that the banks have made in their own interest. They're deciding, you know, we're not going to loan money the way we used to and, in many ways, that's constraining the economy 'cause so many people have blemishes now on their credit records because of what happened in the meltdown. And, you know - but they're actually good credit risks but, you know, they had an unfortunate incident, but a lot of times that is becoming much harder to overcome.
MARTIN: What are the biggest threats to - just looking back at the future, I mean, if the past is prologue, is there something that's been learned over the last five years that first - that policy leaders should be taking to heart in your view? And I understand that that's an ideological question, but I also want to know if there are lessons from the past five years that individual consumers should be taking to heart.
FLETCHER: Well, I...
MARTIN: ...So take those questions separately.
FLETCHER: You know, well, I'll go with the second one first. Like - individual consumers, I think it gets back to the kind of thing that we probably were raised on. You know, the idea of, you know, not living beyond your means and that sort of thing. And I think the lessons of that have, you know, became very clear in the crisis. You know, people - you have to have the money - you have to be able to repay something. You can't, you know, take a loan hoping that you're going to make more money in the future and be able to repay that or hoping to have an asset appreciate and pay it with that. I mean, that's speculation and that speculation will come back to bite you. So, I mean, I think that's one big lesson.
MARTIN: And the second lesson? And we only have a minute left.
FLETCHER: I mean, to me, the other lesson I think that policymakers have to figure out is the thing that's, I think, really hurting ordinary Americans - how do you, kind of reignite the kind of economic cycle where ordinary people are seeing growth in income and growth in their job prospects. And that has not happened, we haven't seen that. We've see a recovery, but the recovery, again, has flowed to the people at the very top, for the most part. And many people, particularly people in the middle, have suffered because jobs in the middle have disappeared. You look at today's jobs report, big gains in low-paying jobs.
MARTIN: Michael Fletcher is a national economics correspondent for the Washington Post. He was kind enough to stop by our Washington, D.C. studios. Michael Fletcher, thank you so much for joining us.
FLETCHER: My pleasure. Transcript provided by NPR, Copyright NPR.