The historically slow recovery of the economy and lack of substantial job growth could cause negative, lasting effects on many 16-24 year olds, and force many retirement age individuals to remain in the workforce, according to a study released today by the Mortgage Bankers Association (MBA).

The impact of a higher unemployment rate for Americans aged 16 – 24 could have a lasting effect on lifetime earnings and attitudes toward risk and social policies, the association said. In addition, those nearing retirement are delaying retirement and reentering the labor force in an effort to rebuild some of the retirement wealth that was wiped out by the recession.

"While Americans, and the American economy, are noted for their resilience, the current financial crisis and recession exceeded the devastation created by other post-World War II recessions," said Professor Joe Peek, the study’s author and Gatton Endowed Chair in International Banking and Financial Economics at the University of Kentucky.  "Saving rates have risen substantially and many Americans will continue to cut their spending sharply out of necessity, others out of fear of what the future holds.  Since consumer expenditures account for about two-thirds of GDP, we are facing the "paradox of thrift" as households try to rebuild their net worth, with the reduced spending likely to delay and weaken the recovery from the ‘Great Recession’."

"The severity and duration of the most recent downturn far exceeds what we have experienced in past recessions and has resulted in the disruption of millions of lives," said Michael Fratantoni, MBA’s vice president of research and economics. "We can’t know for certain at this point, but it is more than reasonable to prepare for a world that has been irrevocably changed by this experience.  For the many reasons discussed in this study, we should expect hesitant homebuyers, cautious businesses, and conservative lenders in the years ahead."