Our current recession, now in its 14th month, is commonly billed as the worst U.S. downturn since the Great Depression of the 1930s. It will become the longest recession since the Great Depression (which lasted 43 months) if it lasts two more months. But it is already being billed as the worst recession in terms of severity since the Great Depression.The employment numbers released today provided further evidence that the situation will be getting worse before it gets better. The unemployment rate increased from 6.7% in November to 7.2% in December, and the establishment survey reported a loss of 524,000 jobs in December. The following table allows one to compare the current downturn, in terms of job losses, to the previous recessions since the Great Depression.
Note that the periods of employment decline listed in the leftmost column of the table do not correspond exactly to the NBER declared recession periods, although they are very close. This is because I looked at the peak-to-trough cycles in net job creation as reported by the BLS establishment survey.
The "Months" column lists how long each spell of recessionary employment declines has been in the United States since the Great Depression. The average spell length is 13.6 months although this number is influenced by the 1945 recession in which most of the declines in U.S. jobs reflected men and women leaving the labor force and giving military service during World War II. Excluding the 1945 downturn in employment, the average length of employment downturn since the Great Depression has been 12.8 months.
Taken together, the last three columns allow one to compare the severity of the current employment downturn with previous downturns. The current recession has produced a loss of nearly 2.6 million jobs since January 2008. More total jobs were lost during the 2001 and 1981 recessions, but each of those lasted longer than our current recession. For this reason the last column calculates the average jobs lost per month during the decline. The average job loss for this recession of about 216,000 per month is greater than any period with a downturn length of 12 months or greater.
However, we still haven't experience the job losses in percentage terms that were seen in many of the previous recessions. So in terms of unemployment, we cannot yet unequivocally say that this is the worst recession since the Great Depression.
This brings me to my last point. If the current recession lasts for another six months (this is conservative) and we continue with the same average losses per month of -216,000 jobs, the total jobs lost will be about 3.9 million representing a nearly 3-percent decline in employment. This would be really bad, but still not as bad in percentage terms as some of our previous recessions. However, if the current recession were to last a year or longer, it would undoubtedly represent the worst since the Great Depression in terms of employment losses. Let's hope things start improving sooner than later.
The "Months" column lists how long each spell of recessionary employment declines has been in the United States since the Great Depression. The average spell length is 13.6 months although this number is influenced by the 1945 recession in which most of the declines in U.S. jobs reflected men and women leaving the labor force and giving military service during World War II. Excluding the 1945 downturn in employment, the average length of employment downturn since the Great Depression has been 12.8 months.
Taken together, the last three columns allow one to compare the severity of the current employment downturn with previous downturns. The current recession has produced a loss of nearly 2.6 million jobs since January 2008. More total jobs were lost during the 2001 and 1981 recessions, but each of those lasted longer than our current recession. For this reason the last column calculates the average jobs lost per month during the decline. The average job loss for this recession of about 216,000 per month is greater than any period with a downturn length of 12 months or greater.
However, we still haven't experience the job losses in percentage terms that were seen in many of the previous recessions. So in terms of unemployment, we cannot yet unequivocally say that this is the worst recession since the Great Depression.
This brings me to my last point. If the current recession lasts for another six months (this is conservative) and we continue with the same average losses per month of -216,000 jobs, the total jobs lost will be about 3.9 million representing a nearly 3-percent decline in employment. This would be really bad, but still not as bad in percentage terms as some of our previous recessions. However, if the current recession were to last a year or longer, it would undoubtedly represent the worst since the Great Depression in terms of employment losses. Let's hope things start improving sooner than later.
Rick - I'm not a macro guy so I don't know if this is true. I recall a history professor of mine in undergrad saying that the way unemployment was measured in the great depression is different than it is now. His point was that in the great depression was "real unemployment" not like the way they measure it now.
I've never bothered to check this statement - though it appears to have stuck with me - is this true? Did the measurement of unemployment change at some point and these are corrected for that in some way?
It should also be noted that the guy was kind of kooky. He would say things often just to get a rise out of people. I remember him once trying to argue that genocide wasn't, inherently, a bad thing. He was also Jewish. This has fascinated me for a long time.