Comparing this recession to the last five
The dramatic chart Nancy Pelosi's office put out comparing job losses so far in the current recession with those in 2001 and 1990-1991 has gotten a lot of play in the Internets. As well it should–it paints a dramatic picture (job losses in the current recession have been much more severe). But we already knew this recession was a lot worse than the last two. It would be far more informative to have comparisons with the deeper recessions of 1981-1982 and 1974-1975. So here's a chart of what happened to payroll employment during every recession since the mid-1970s. I've done everything in percentage terms because there are a lot more people in the labor force now than in the 1970s, but otherwise followed the format of the Pelosi chart:

Graphic by Feilding Cage/TIME.com
What do we learn? So far the fall in employment is comparable to that in 1974-1975 and 1981-1982. If the comparison holds, the declines should end within the next four or five months. But we of course have no idea whether the comparison will hold. Past performance is no guarantee of future results.
Another lesson brought home by the chart is how weak the recovery from the 2001 recession was. It was a mild recession, but it took four years for employment to return to its February 2001 peak. Setting aside the worst-case scenario of a continued downward employment spiral that puts 1974-1975 and 1981-1982 to shame, a recession that combines a severity akin to that of 1974-1975 and 1981-1982 with a recovery as anemic as 2001-2002-2003-2004-2005 would be not a whole lotta fun.
Update: Economist William Polley beat me to this, and includes in his chart every recession since World War II. That makes the chart pretty hard to read--but it's still worth a look.
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1
Justin,
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Your reference to 2001- 2005 has 2005 repeated within the string. Other than that, somebody should show this data to our Congress and Senate.
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They are acting as if we are facing a V or U shaped recession. Many economists do not think that this is the case based upon inherent structural difficulties within our economy that mimic the Great Depression. If it had not been for a combination of FDR's New Deal and WWII, I suspect that the economic period may have been referred to as the lost "score."
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Further, a world-wide consumer-driven economy without a consumer is simply a recipe for muddle-through existence. The American public has been the consumer of last resort while the government has turned up the volume on the printing presses and now along with China and some Arab institutions are the lenders of last resort. -
2
Thanks, Bryan. Fixed it.
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3
Looks like the previous administration's policies have given us an object lesson in how to extend a recession, or at least in how to keep a recovery from helping the labor force.
So I'm all for trying something different. -
4
At what point does a recession become a depression; and will it take the goverment a year later to declare it as it did this current recession?
Thank you.
Also, what factors do you think played in making the recovery from the 2001 recession so anemic? I think the mistake we made was cutting taxes the same time we went to war; but maybe the tax cut was what gave us any recovery? It kinda looks like they were simply a bandaid that stopped a full correction from occurring.
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5
It would be nice to see on this graphic bullets of the key legislation (if any) that targeted the recession, to help determine the relationship between legislation and return to normalcy.
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6
jeremiah,
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What would be considered key legislation? Would the highway bill of '05 count? What about the prescription drug add-on for Medicare? Further, how would one isolate the policy initiatives from the Fed's monetary actions? I suppose one could attempt to do a large graph but that is a lot of work even for one as smart as Justin. -
7
I've been doing this chart after every employment report for several months at angry bear.
But I think you 1981 data is wrong. My data from BLS does not show that severe a drop in 1981. Bill Polley's charts does not agree with you either.
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8
@spencerengland: Polley's chart for 1981-1982 appears to be identical to mine--a cumulative drop maxing out at 3.1%. Your chart uses the household survey numbers, right? So it should be no big surprise the two don't exactly agree.
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9
Quick question? Job losses tend to be a lagging indicator right? Or has that changed over time due to the speed of our information flow? That would be neat to see as graphed on maybe a GDP bar chart.
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10
@bryanfromhouston: The unemployment rate is a lagging indicator. I think payroll employment is a coincident one.
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11
bryan -- I'm not so sure that job losses are now a lagging indicator. Caterpillar had a record sales year in 2008, and enjoyed hefty profits, yet laid off 20,000 people (IIRC 20% of its global work force.) Companies aren't waiting to cut jobs, they seem to be doing so pre-emptively in order to maintain profit margins.
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As to the chart -- I think it highlights the differences between "cyclical" and "externally created" recessions. The "deep" recessions are all externally created -- 1974 was caused by the oil embargo, and 1981 was caused by Greenspan raising interest rates. In both cases, the same forces that created the recessions brought about the end of them -- OPEC started selling us oil again, and Greenspan brought rates down.
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The current downturn resembles an "externally created" recession, but there is no entity that can end it -- its structural, and there is no OPEC or Greenspan that can simply change policies and get the economy moving again.
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IMHO, this looks most like the Depression -- another "structural" downturn. And its going to be the kind of thing that is best served by "waiting it out", and spending money to reduce the impact on those affected, rather than trying to shore up the structures that are inherently unsound. -
12
If it means anything, the curve of the current job losses (as a percent) is steeper than any of the others over a similar 9-month time period, and doesn't even show a change in slope. That is disturbing, but, I would think, impossible to predict what's next from that.
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