TIME Fatherhood

Most Stay at Home Dads Not There By Choice

Lynn Koenig—Getty Images/Flickr RF

More dads are raising their kids full time, but that's not necessarily good news.

There has been a sharp rise in the number of fathers staying at home with their kids in the last 25 years, but most of them are not doing it voluntarily. More than a third of full-time non-working dads are there because of illness or disability.

While the at-home dad has become a popular cultural figure, the reality is a little different. A new analysis of Census data from the Pew Research Center has found that in 2012, only 7% of all fathers who live with their kids were at home full time. That’s about 2 million dads at home, down from 2.2 million right at the end of the recession in 2010 but up compared to the 4% in 1989.

But only 21% of the dads now at home say their primary reason for staying home is to take care of their family. The biggest share of them, 35%, say their health prevents them from working, and another 23% say they’re not able to find work. The other quarter are in school or retired or home for other reasons such as working for no pay for a family business.

The large numbers of dads who are home unwillingly is reflected in the economic wellbeing of those families. Almost half of all stay at home fathers live below the poverty line. A fifth of them don’t have a high school diploma. A recent Pew study found that a third of stay at home mothers lived in poverty too, but the figure among non-working dads is much higher.

Fathers who’ve voluntarily eschewed a career in favor of raising their kids full time are still nowhere near the norm, but the numbers are growing. They represent 21% of all stay home dads in 2012. In 1989 they were 5%. Even more surprisingly about half of working dads say they would stay at home to look after their kids if they didn’t have to work, which is roughly the same as the number of moms who say that.

But those pioneering dads still face something of an uphill battle for respect. While Pew has found that about half of the population thinks that the ideal family arrangement is to have mom home with their kids, only 8% of Americans feel that way about dads.

MONEY Shopping

If You’re Average, You’ll Spend $98 Today

Daily consumer spending averaged $98 in May, the highest it has been in six years -- an indication that the economy is heading in the right direction.

If you’re like most consumers, according to a recent Gallup poll, you reported spending an average of $98 in May. That’s $10 higher than April, and the highest monthly average seen since early 2008.

Historically, consumer spending in May tends to be higher than in most other months, as people pile up expenses related to the start of summer—yard work, spring cleaning, barbecues, etc. December is usually a close second, what with holiday parties and gift shopping. Sure enough, the most recent three-day average high for spending was measured over Memorial Day weekend (daily spending: $134), followed by a trio of days right before Christmas 2013 (daily spending: $129).

Since 2009, when consumer spending in May was measured at just $63, there’s been a consistent increase, rising to $90 in May 2013 before hitting $98 this year. In the big picture, the trend may be viewed as an indication of an economy on the upswing—especially when other data, including improving confidence among small and big businesses alike, are factored in.

Another interesting indicator is that the national birth rate, which has fallen over the course of five years and has been viewed as a sign of larger economic strife and uncertainty, appears to have hit bottom. Births were up slightly in 2013 compared to the year before, an indicator that people have been feeling (slightly) better about bringing a baby into the world lately, even with all of the costs and responsibilities of being a parent.

MONEY The Economy

5 Reasons the Economy is Not Headed for Recession

Growth will soon resurface. Cultura RM/Liam Norris—Getty Images

Despite disappointing GDP numbers, the economy is firmly headed higher.

The economy may have slipped out of gear, but it’s not in reverse.

True, a government report released late last week showed that the U.S. economy did actually contract at an annual rate of 1% at the start of the year, which was much worse than consensus forecasts for a 0.5% decline. That marked the first time gross domestic product had actually shrunk since the first quarter of 2011.

This would explain why market interest rates have been falling so much lately — yields on 10-year Treasuries have sunk from 3% to 2.53% this year. In periods of slow or no growth, investors routinely favor fixed income over equities, which pushes bond prices up and yields down.

Before you start bandying about the “R” word, though, let’s keep things in perspective.

A recession is loosely defined by two consecutive quarters of GDP contraction (actually, it’s officially determined by a group of economists at the National Bureau of Economic Research). The economic data released last week represent just one quarter of activity. Plus a survey of 42 economic forecasters by the Federal Reserve Bank of Philadelphia found strong expectations that the economy snapped back in the second quarter. In fact, the economy is thought to have expanded 3.3% in the spring.

What’s more, forecasts for GDP growth for the remainder of the year are on the rise. In the third quarter, the economy is now expected to expand 2.9%, not 2.8% as was previously thought, according to the Philly Fed survey. And fourth-quarter GDP is expected to rise 3.2%, up from earlier forecasts of 2.7%.

Also, there are at least five economic indicators that would confirm the economy is on much surer footing than either the first-quarter GDP report or bond yields would indicate. Among them:

1) The manufacturing economy is improving.
If the economy were on the verge of reversing course, you would at least start seeing the nation’s industrial sector flatten out. Yet as you can see below, that’s not happening.

US Industrial Production Index Chart

US Industrial Production Index data by YCharts

Nor do investors expect it to, which explains why Wall Street continues to bid up shares of economically sensitive sectors like industrials and basic materials faster than the broad market.

^SPX Chart

^SPX data by YCharts

2) Consumers are getting stronger, not weaker.
If consumer spending represent two thirds of the nation’s GDP, then it would be difficult for the economy to slip into recession if households are loosening up their purse strings. Well, retail sales for discretionary purchases (things you don’t really need) with cash has been growing 2%. Meanwhile, discretionary spending on items requiring financing is up much more—5.6%. “Consumers are flexing their muscles again,” says Jack Ablin, chief investment officer for BMO Private Bank.

3) Small business confidence is growing.
One sign the economy is not in dire shape is that “corporate confidence—even among smaller companies—is improving,” says Liz Ann Sonders, chief investment strategist at Charles Schwab. Small companies are often the canaries in the coal mine of a lousy economy. A year before the economy crashed into recession in December 2007, the NFIB Small Business Optimism was already in decline (in fact, it had been falling gradually since the end of 2005). So far this year, the index has climbed, from a reading of 91 in February to 95.

4) Big business is also gaining confidence.
Not only can you see that in booming merger & acquisition activity, but corporations are slowly but surely adding to their payrolls.

US Change in Nonfarm Payrolls Chart

US Change in Nonfarm Payrolls data by YCharts

5) Economic signs that normally offer clues about future activity are running positive, not negative.
The Conference Board’s index of leading economic indicators “has climbed for the twelfth time in 13 months to yet another new cyclical high,” notes Ed Yardeni, president and chief investment strategist at Yardeni Research.

By contrast, in the 12 months leading up to the start of the 2007-2009 recession, the leading economic indicators index had been precipitously falling.

So buck up.

TIME Economy

Americans Splashing The Cash At 2008 Levels, Survey Finds

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Tom Hahn—Getty Images

Gallup survey says consumer spending hit a six-year high in May, a significant $10-a-day increase on the month before

American consumer spending hit a six-year high in May, according to survey results released by Gallup on Monday.

Americans reported spending $98 a day, spiking $10 above the April average and climbing higher than any other point since May of 2008.

Gallup noted that spending was buoyed, in part, by a surge of Memorial Day weekend shopping. Past surveys have typically registered $3 to $6 jumps, but this year, with spending jumping by $10, the results suggest something deeper is stirring in the economy, other than a sudden demand for hot dogs.

TIME Economy

Economy Shrinks for First Time Since 2011

A rail mounted gantry crane, center, as well as a Straddle Carrier, right, used to unload and load a container ship at the Norfolk International Terminal in Norfolk, Va. on March 26, 2014.
A rail mounted gantry crane, center, as well as a Straddle Carrier, right, used to unload and load a container ship at the Norfolk International Terminal in Norfolk, Va. on March 26, 2014. Steve Helber—AP

The U.S.' Gross Domestic Product contracted by 1 percent in the first quarter of 2014, marking the first contraction in years as government economists revised earlier figures by taking stock of additional glum measures

The U.S. economy shrunk by 1% in the first quarter of 2014, according to government data released Thursday, marking the first economic contraction in three years.

The figure, from revised estimates released by the Commerce Department, was revised downwards from an earlier estimate of 0.1% growth in gross domestic product, as government economists took stock of additional glum measures. The Commerce Department noted that on top of a winter wallop to retail and construction, real GDP was dragged down further by a rise in imports and a marked decline in inventory growth. The last time real GDP contracted was in the first quarter of 2011 at the tail end of a punishing recession.

Corporate profits also declined by an estimated 9.8%, the largest drop recorded by the Commerce Department since the fourth quarter of 2008.

Still, analysts predicted that the contraction, while unsettling, would not last into the second quarter. Recent monthly data points to signs of economic life, including a drop in jobless claims and jumps in durable good orders and retail sales.

TIME Economy

Timothy Geithner: This Is Why We Didn’t Hang the Bankers

+ READ ARTICLE

In the midst of the financial crisis, anger at bankers (who helped create the crisis) was at an all-time high. Former Secretary Treasurer Timothy Geithner explains why the government had no choice but to bail out big financial institutions.

MONEY Economy

What’s Your Money State of Mind?

Money magazine's exclusive poll reveals both improved confidence and lingering anxiety about our financial well-being.

Money's exclusive survey reveals mixed emotions when it comes to our personal economy: We're feeling pretty good today, but worried about our prospects for the long run.

At first glance the Brough family of Dallas seems to have emerged from the tumultuous economic events of the past six years unscathed.

Sole earner Richard, 44, a project manager in software consulting, worked steadily throughout the financial crisis — even landing a new job that pays $45,000 a year more than his old one, which pushed his salary comfortably into six-figure territory. The value of the home he shares with wife Kelley, 46, and two of their four children (ranging in age from 15 to 27) has rebounded to pre-2007 levels, and so has his 401(k).

Yet five years after the official end of the downturn, Brough feels anything but confident about his finances.

“I’m more obsessed with security and worried about the future than I was during the recession,” he says. “Even though I was making less then, our money seemed to go further. I’m anxious about being able to pay for everything we need, anxious about our savings, anxious about staying out of debt.”

The results of MONEY’s new national survey of more than 1,000 Americans age 18 and older reveal that most people share Brough’s concerns: The Great Recession may be over, but a Great Insecurity seems to have emerged in its wake.

True, the majority of respondents acknowledge that their finances are better now than they have been in some time. About three-quarters report that their situation has stabilized or improved compared with a year ago; less than half felt that way when MONEY posed that question in 2009.

Indeed, in that earlier survey, only about 10% said they were doing better than the year before, vs. 30% now. And far fewer folks seem to feel as if they’re teetering at the edge of a financial cliff: Just 24% say their circumstances have gotten worse over the past year, vs. 51% in 2009.

Meanwhile, people are even more optimistic about the year ahead: Almost nine out of 10 expect that their finances will be the same or better 12 months from now.

Yet while the outlook for today and tomorrow has brightened, the day after tomorrow appears decidedly grayer. Six out of 10 respondents own up to being worried about their family’s long-term economic security, and even greater numbers register anxiety when getting down to specifics; they’re really worried about having enough money for retirement, how they’d manage if a financial emergency arose, whether safety net programs such as Social Security and Medicare will be intact when they need them, and how they’ll pay for health care.

Moreover, that undercurrent of anxiety cuts across virtually all groups: Young and old, men and women, married couples and singles, even the affluent — all shared the same concerns.

Related: How we feel about our finances

Some of the fretting may be the result of a lingering hangover from the financial crisis. “People are influenced by what is more recent and most vivid, and that is still the recession,” says behavioral finance expert Meir Statman, a professor at Santa Clara University in California. “We fear that what happened in 2008 will happen again.”

The current state of the economy is also cause for continuing concern. “The unemployment rate is still pretty high, and there are a lot of questions about what the government is going to do,” says Olivia S. Mitchell, a Wharton economics professor who has studied the impact of the financial crisis on U.S. households. “We’re in an environment of pervasive uncertainty that’s not going to go away for years.”

What is causing the most agita about our financial future — and why? How has that affected the way we manage money? And what are the best steps to alleviate our anxiety and move forward? The answers follow, along other insights from the 2014 Americans and Their Money survey.

We’ve regained some stability — and faith

When MONEY polled Americans about their finances in 2011 and 2009, the nation was hunkered down and wrestling with post-recession panic. Families had pulled back drastically on spending, postponed vacations and major purchases, and even curtailed giving to charity. People were deeply worried about losing their jobs or getting a pay cut, concerned about the eroding value of their homes, and anxious about big losses in the financial markets.

Five years ago, when asked whether they’d be better off putting money under the mattress or in stocks, half of the respondents chose the bed.

Now that home values and stock prices are up and unemployment is modestly down, a lot of that fear has abated. This year, for instance, 71% of those surveyed opted for stocks instead of the mattress. Folks are once again comfortable tuning out the daily movements of the market: Only about a third of those surveyed said they were laser focused on financial news, vs. two-thirds in 2009.

There’s also a greater willingness to stretch for risk: In the most recent poll just over half of Americans said it was more important to keep investments safe than to aim for a higher return. While that’s a substantial number, it’s down from 64% three years ago. In general, concerns about losing money in the market, declining home values, and being laid off have dropped to close to the bottom of the collective worry list.

Related: 5 ways to reduce your financial anxiety

Other signs bolster the notion that Americans are backing away from the financial bunker mentality that swept the nation after the recession. A Challenger, Gray & Christmas analysis of employment data, for instance, found that more Americans are quitting their jobs, reflecting growing confidence in their ability to find a better position elsewhere.

After years of relative frugality, Americans are loosening the purse strings a little. Sales of big-ticket items such as cars and new homes recently hit six-year highs, and the fourth quarter saw the largest quarterly increase in outstanding credit since before the recession.

Among those feeling calmer is Ralph Schmitt, 69, of Fortson, Ga., whose savings fell by a third in the crash.

When the recession arrived, Ralph, who had planned to retire in 2008, decided to postpone that step. He and his wife, Kathleen, did not sell any investments, however, and by late 2009, with their portfolio growing again, Ralph felt confident enough to quit for good.

“I was still worried about the uneven recovery and our retirement savings,” he admits, “but I believed in the resilience of the U.S. economy and the momentum of the stock rebound.”

Besides, he says, he and Kathleen, 67, who stopped working in 1993, felt they could live on less, having drastically cut back on their spending for travel, fine dining, and theater.

Today the Schmitts’ portfolio is back to where it was in 2007, and the couple have “kicked up” their spending accordingly. “I wanted to travel extensively with my wife while we still had our health,” says Ralph.

Good habits have held

We may be opening our wallets again, but that doesn’t mean we’ve abandoned the fiscally prudent practices adopted after the crash. Nearly three-quarters of those in the MONEY poll reported that over the past three years they’ve been cutting back on luxury purchases and eating at home more often — a modest drop from 2011, when consumers were still shell-shocked from the financial crisis, but a big increase from the 2009 survey.

Nearly six in 10 say they feel guilty about buying something they don’t need, virtually unchanged from three years ago. And six in 10 say they’re trying to beef up their emergency cushion, a huge jump from 2009, when less than a quarter said the same. Indeed, the national savings rate, while down from its post-crash peak, is now 4%, about where it’s been for much of the past three years and substantially above the 1% rate of the pre-crisis boom years.

Whether we’ll be able to maintain that restraint for good, however, is unclear. “We’re not back to a status quo environment that would allow you to make those kinds of judgments,” says Scott Hoyt, senior director of consumer economics at Moody’s. He thinks consumers will let loose eventually: “Underestimate the desire to spend at your own peril,” he says.

It’s particularly tough to assess the long-term trend while the recovery is still so uneven, notes Caroline Ratcliffe, a senior fellow at the Urban Institute, pointing out that some groups, such as high-income baby boomers and retirees whose wealth is tied to the stock market, are feeling more flush than others these days.

Jim Durkis says the improving economy has not changed his habits — yet. The government lawyer and his wife, Deborah, an elementary-school teacher, both 50, were looking to buy a bigger house near where they now live in Albuquerque but decided against the move when housing values in the area declined.

Since the recession, the family, which includes Jason, 22, and Kaja, 21, have switched insurance companies, delayed vacations, and cut cable — though they signed up again last summer after Deborah, a former-spender-turned-bargain-hunter, found a good deal.

Though both spouses are working and he has a solid pension plan, Durkis says he’s still focused on saving. “I’m not convinced there’s been a true recovery,” he says. “I’d rather have extra money, just in case.”

Additional reporting by Kerri Anne Renzulli.

Part 2 of Money magazine’s survey: The long term still looks uncertain

MONEY Economy

Americans Still Worried About Their Financial Future

Six out of 10 people surveyed by Money magazine own up to being worried about their family's long-term economic security.

Most Americans believe that the Great Recession is over, according to MONEY magazine's new national survey. But a Great Insecurity seems to have emerged in its wake.

Many of us are sticking to the good financial habits we adopted after the crash — a trend explored in Part 1 of this story. One reason for that: Once you look beyond the immediate future, optimism fades and it becomes clear that Americans remain deeply worried about their long-term economic prospects.

Consider: In the MONEY survey, nearly two-thirds of those earning less than $100,000 and roughly half of those making six figures said they were worried about their family’s economic security; roughly six in 10 Americans were anxious about how they would pay their health care costs.

The majority fell behind on their savings, given their stage of life, and almost three out of four were concerned that their money wouldn’t last through retirement. Other recent studies have found similar concerns: New research from the Consumer Federation of America, for instance, found that only a third of Americans feel prepared for their long-term financial future.

Why does the outlook seem so scary? Some experts think the events of the past six years have shaken the belief in our ability to accumulate wealth over the long haul.

“When the housing market fell, that really scared people,” says Michael Hurd, a senior researcher at Rand, who studied the effect of the recession on household finances. Hurd found that a decline in home values caused people to cut back on their spending more than a similar drop in the stock market.

In addition, the erosion of trust in our financial system will have a lasting effect, says Tyler Cowen, professor of economics at George Mason University.

“If you don’t believe that your environment will persist, you’re not willing to stake out plans,” Cowen notes. “For example, you won’t buy a home based on the premise that in five years you’ll be earning more money. The volatility of the stock market and the government shutdown have only made it harder.”

Speech pathologist Janel Butera, 47, is one who isn’t counting on anything. A divorced mom of two sons, ages 12 and 13, from Corona, Calif., Butera has made reducing spending and boosting savings a priority over the past five years. Out went the gym membership and vacations; packed lunches and day trips to the beach are the new norm.

“The economy as a whole — I don’t put a lot of faith in it,” she says. “I’m not counting on getting any retirement help, not even Social Security.”

Butera is proud that she’s managed to rebuild her finances after suffering the twin hits of divorce and the recession but is still anxious that she might one day become a burden to her boys. “I worry about them having to provide for me when I’m older,” she says.

Her concern is shared by many: In the MONEY poll, one in five Americans with children said they would probably need their kids’ financial support someday.

We’re living close to the edge

One reason we’re not feeling so hot: While our 401(k)s may be flush again, our emergency savings are not. Half of the respondents in the MONEY poll confessed to living paycheck to paycheck; roughly six in 10 felt they didn’t have enough money set aside for emergencies and didn’t think the family’s breadwinner would find it easy to get another job if laid off.

And almost all people, it seemed, felt like they’d need a higher income than they now earn to really be financially secure — even those who currently bring home a six-figure income. No wonder that anxiety about how we’d cope with a real financial emergency tied with concerns about outliving retirement savings as the most prevalent money worry.

In fact, money has gotten tighter for many lately. Household income, adjusted for inflation, has dipped 4.7% since the recession, economist Cowen points out.

One thing’s for sure: All this stress isn’t helping our love life. The MONEY poll found that finances are both the most frequent source of spats between couples and the cause of the most serious arguments — far ahead of the second-place finisher, household chores, and snoring, which came in third.

Edward Martinez of Tyler, Texas, is one of the many who are worried about not having an adequate cushion. Though Martinez, 44, made $140,000 working for a military contractor in Iraq after the recession, he now earns less than six figures as a technical specialist with the Smith County appraisal district.

He and his wife, Jennifer, 38, a professor at the University of Texas, have an 18-year-old daughter living at home and also help support Martinez’s 22-year-old daughter from his first marriage.

Right now the family has only about a month’s worth of savings, which could easily be wiped out by a run-of-the-mill financial emergency, Martinez acknowledges. He’s in the process of getting a pharmaceutical degree, which he hopes will boost his earning power a few years from now.

Like Martinez, many parents these days are helping grown kids, making it even harder to save. More than a third of the parents of children 22 and older in the MONEY survey are helping out at least one of their brood; of those, three in 10 are shelling out $5,000 or more a year. And that’s not likely to change anytime soon: In the survey, parents providing such support believed their adult child wouldn’t gain full independence until age 30; adult kids supported by a parent put that age at (gulp) 32.

The kids may be all right in the end after all

Such findings are in keeping with alarms many experts have sounded predicting that young adults would bear the most lasting scars from the Great Recession, just as the Depression had a lifelong impact on the way people who came of age at that time managed their money.

Certainly millennials have had a tough slog so far: The job market for this youngest generation of workers is grim (nearly half of those unemployed are under 34, a Demos study has found), and the average student-loan debt for recent college grads is $30,000.

Atlanta resident Courtney Clemons, 25, has a typical millennial story. The Georgia State University grad interned at a travel agency while in school and was hired there full-time after she got her degree. But her earnings, ranging from $25,000 to $35,000, depending on bonuses, aren’t enough for her to get by on her own. So her parents provide about $500 a month to cover her car and health insurance, cellphone bill, and some spending money. Contributing to the problem: She has $90,000 in student loans.

“The jobs you get after graduation aren’t conducive to living on your own,” she says. Morley Winograd, co-author of Millennial Momentum: How a New Generation Is Remaking America, agrees. “Millennials are a very economically stressed generation, and that stress will last for their lifetime,” he says.

Yet MONEY’s survey, among others, shows a more mixed picture. Today’s younger folks do seem at least as value-conscious as their elders, and maybe even more so: A greater percentage of millennials say they are eating at home these days than they were in 2011, for example, while the numbers had dropped slightly for the general population. And for now at least, younger investors also seem more nervous about the stock market, keeping a greater percentage of their portfolios in cash than older people do.

When it comes to other attitudes about spending and saving, however, millennials seem to be pretty much like everyone else. They are just as likely to covet new, innovative products. And they aren’t cutting back on luxury spending or postponing vacations with any greater frequency than their elders either. Nor do they place more importance on saving; almost everyone, young and old, affluent or not, says that saving money is more important to them now than it was a few years ago. And for all the lamentation about how dim the prospects are for this generation, younger folks are surprisingly upbeat about their future: The vast majority (86%) expect to live as well as or better than their parents.

For now, though, while millennials may be having difficulty leaving the nest, no one seems particularly unhappy about it.

“Boomers created a helicopter parenting style and went out of their way to be friends with their kids,” says Winograd. “Many are delighted to have their adult children home.” The kids apparently don’t mind either. A recent Pew study found that 78% of adults ages 25 to 34 who were staying with their parents said they were satisfied with their living arrangements.

Some experts believe this turn toward family may be one recession-induced change that truly lasts. Reality is causing more people to let go of the postwar expectation that living standards will naturally just keep getting better, says Stephanie Coontz, a professor of history and family studies at Evergreen State College in Olympia, Wash.

Many may end up caring less about keeping up with the Joneses and more about being with the people who matter the most to them as a result. And indeed, almost 80% of the respondents to the MONEY survey say spending time with family is more important than ever to them, an increase of 10 percentage points over the past five years.

Janel Butera is one of them. The speech pathologist and mom felt her financial situation was secure enough last year to cut back her workweek from five days to four, so she went for it. “Sure, I could use the money,” she says, “but spending time with my kids is more important.”

Additional reporting by Kerri Anne Renzulli.

 

TIME Economy

Report: Low-Pay Jobs Replace High-Pay Jobs Since Recession

A diner sits next to a help wanted sign at a McDonalds restaurant in the Brooklyn borough of New York, on March 7, 2014.
A diner sits next to a help wanted sign at a McDonalds restaurant in the Brooklyn borough of New York, on March 7, 2014. Keith Bedford—Reuters

A new report by the National Employment Law Project finds that unsteady economic recovery has been powered by the replacement of high-earning jobs lost in the recession with low-paying positions in the service industry

Even as the economy has slowly emerged from the worst downturn since the Great Depression, job growth since 2008 has come predominantly in the form of low-wage service industry jobs replacing high-earning jobs lost in the recession, according to a new report.

Although employment rates have roughly reached pre-recession levels, most of the jobs gained since 2008 have been in lower-wage industries, according to a report from the National Employment Law Project. Lower-wage industries accounted for 22% of recession job losses, but are responsible for 44% of the hiring in the recovery. There are now almost two million more low-wage workers than there were at the start of the recession, according to the report.

High-wage jobs accounted for 41% of job losses but have only grown 30% since the recession, and mid-wage jobs made up 37% of job losses but only 26% of recent employment growth. That means there are almost two million fewer high- and mid-wage jobs than there were before the 2008 collapse, according to the report.

After 49 consecutive months of jobs growth, employment levels are roughly back to where they were before the collapse. The growth in low-wage jobs has been powered in part by retail and by the food and beverage industry.

The report focused on the private sector, but local government employment has declined by 627,000 jobs since the recession, with 44% of those losses taken from local education.

TIME Greece

Tech Start-Ups Bloom in Recession-Hit Greece

The Greek economy is reeling from six years of recession, with youth unemployment around 60 percent, but a new wave of startups could be just the thing to turn the economy around

A year ago, when Greek start-up Workable had secured their initial funding deal, the company’s headquarters consisted of six guys – including the two founders, Nikos Moraitakis and Spyros Magiatis – in three barely furnished rooms. These days, 16 of Workable’s 18 employees fill a grander, yet still conspicuously relaxed office space on two floors in the plush Athenian district of Psychico. The new office has lofty views, an abundance of couches and beanbags. People walk around in flip-flops or bare feet. The company, which offers business clients user-friendly software to facilitate the hiring process, recently opened satellite offices in London and Portland, Oregon, and has just announced a $1.5 million funding round led by the venture capital fund Greylock IL.

For a Greek economy reeling from six years of recession, start-ups like Workable may offer hope for the future. The prospects of employment in government or with an established company have become less appealing and less likely for the droves of well-educated IT engineers produced by Greece’s universities. Unemployment in Greece stands at 27.5 percent, and youth unemployment has hovered around 60 percent for months. The country’s start-up sector is small, far too small to make a dent in the staggering joblessness numbers, but it is growing rapidly.

The turning point was the creation of four EU-backed venture capital funds in December 2012 that specifically target technology start-ups in Greece. Workable’s initial funding round came largely from one of these, JEREMIE-Openfund II, which has 11 million euros under management (70 percent from the EU), and which has already funded eight Greek start-ups in as many months. Aristos Doxiadis, an economist and a general partner at the fund, said its initial target was to invest in 25-30 companies by the end of 2015, which he feared might prove too ambitious, but is now well on track to being met. The three other funds are larger, managing between 17 and 30 million euros. The evolution has not been without its growing pains – among them a dearth of experienced investors – but in the past year, start-up growth has outpaced expectations.

Now, the highest-flying among Greece’s start-ups are already spreading beyond the local scene, led by deals like Workable’s funding round from Greylock. “It is certainly a boost for the local start-up ecosystem,” says Moraitakis, Workable’s 36-year old CEO, who has a degree in Software Engineering from Imperial College in London. Along with co-founder Magiatis, he previously worked at Upstream, a Greek mobile marketing company that serves operators in more than 40 markets.

The Greylock deal is the latest in a series of international successes for Greek start-ups. Last September, US-based software Company Splunk acquired Bug Sense, a mobile app analytics company. Taxibeat, a digital taxi-hailing application, secured $4 million in funding led by the European fund Hummingbird Ventures. “It’s not that big investors will suddenly put money in other Greek tech companies just because they come from the same place we do,” Moraitakis explains. “But it will help open doors for them.”

In fact, the deal already seems to have had a ripple effect. “After it was made public, a number of big players on the European venture capital circuit began asking us what other promising companies we can tell them about,” says Doxiadis of Openfund II, which also contributed to Workable’s current round of funding. Greylock IL, an affiliate of Silicon Valley-based Greylock Partners – one of the biggest venture capital firms in the world with over $2 billion under management, and among the most discerning investors in the new digital economy – has backed companies such as Facebook, LinkedIn and Dropbox. Its portfolio consists of 30 Israeli firms and only 9 European companies, including Workable.

Workable was founded in June 2012, a few days before the critical, repeat parliamentary elections in Greece that many thought would lead to its exit from the euro. Moraitakis came home to Athens from Dubai, where we has working for Upstream, just as the election campaign for the initial May poll was getting under way. His friends thought he was crazy. These days, having bucked the emigration trend, he is busy trying to engineer what he calls a “reverse brain drain” – bringing other talented Greeks back to Athens.

The first meeting between Workable’s founders and Greylock took place in November 2012 in London, when the company was still at a very early stage of development. The fund kept its eye on Workable’s product development, in particular its suitability for small and medium-sized firms that do not have dedicated HR departments. They saw the high rates of growth: in early 2014, the month-on-month increase in clients has reached 30%. That performance prompted investment despite Greece’s less than stellar reputation as a place to do business.

Greece’s economy is still very troubled; however, the ingredients are there for a startup that may turn out to be a world beater, and venture capitalists are taking notice. “We feel there are benefits to Greece,” says Tilly Kalisky, associate partner at Greylock IL. “There is qualified engineering talent at competitive costs compared to European and US equivalents. We feel that excellent entrepreneurs and companies can be created from anywhere.”

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