Yes, it’s a depression (cont’d)

Get a load of this chart, from Calculated Risk. It shows job losses in the 11 U.S. recessions since 1948. Our Little Depression is in a class by itself:

Job losses in all U.S. recessions, 1948-2011


(Hat tip: James Fallows.) A few things to take away:

  1. The maximum decline (6.4%) of jobs in the current slump was the worst of any of these recessions.
  2. Even after 18 months of so-called recovery, the current employment decline (5%) is larger than the maximum decline in all but one of the other recessions.
  3. At this point after the start of every other recession (except, ominously, the previous one in 2001), it was over and employment had fully recovered its peak level.

Summing up: It has now been 43 months since the last employment peak, and employment is still down 5%, a bigger job loss than in every recession since 1950. By this time after every other postwar recession (but one) began, employment had fully recovered.

If this isn’t a depression, then economists and the media have redefined depression to mean “something that occurred in the 1930s.”

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3 Responses to “Yes, it’s a depression (cont’d)”

  1. Laurence Says:

    What methodology is this using? The unemployment calculation has been jiggered so many times that it’s impossible to make comparisons. For example, the long term unemployed were counted as part of the official unemployed until 1994 when they were recategorized as not “unemployed”, but rather “discouraged workers” (who are not considered part of the work force and so are dropped out of the calculation).

  2. Mark E Says:

    Lawrence, are you saying that it’s even worse than it looks?

    Regardless, the time it has taken to get back to normal has been progressively longer since 1981 (coincidentally? the year Michael Moore said the middle class started to die). From the looks of the current downturn, we may not fully recover, and be forced to reassess the “normal” unemployment rate. I sence a watershed moment in economic history and I am definitely depressed.

  3. Ranjit Says:

    Larry, is your source Shadowstats by any chance?

    I would have to see a lot more hard data to be convinced that the unemployment rate methodologies are wildly inconsistent over this span. The BLS does change its definitions from time to time, but to the extent that the data are available they go back and retrospectively create historical data series to go with those definitions. When the methodologies render the data from different periods not strictly comparable, they indicate as much on their tables. It is true that that happens a lot (see ftp://ftp.bls.gov/pub/special.requests/lf/aat1.txt), but I think the general point of the post is still valid — this is the worst and most prolonged spate of joblessness since WW2.

    Regarding the 1994 changes, you may be referring to what’s described in here:

    http://www.bls.gov/opub/mlr/1995/10/art3full.pdf

    Some honest confusion might have arisen because the standard definition of the unemployment rate — “all persons 16 or older who are out of work and currently looking for work, divided by the total labor force” — used to correspond to the “U-5” unemployment data series, whereas now (after 1994) it is the “U-3” unemployment rate and “U-5” corresponds to a broader measure that includes “discouraged workers” and other marginally attached job seekers who are not actively looking for work but would take it if offered. But the U-3 series in the BLS historical tables is consistent as regards that basic definition, which excludes anyone who isn’t looking for work.

    Or you may be referring to what’s described on p. 185 of this:
    http://www.bls.gov/cps/eetech_methods.pdf

    As that page says, the BLS did tighten its definition of “discouraged worker” slightly in 1994 (to qualify, a person had to say they’d looked for work in the past year and that they were available for work now). However, that wouldn’t affect the basic unemployment rate, which didn’t include “discouraged workers.”

    But discouraged job-seekers are hardly invisible in the BLS’s unemployment statistics. The BLS keeps track of six different unemployment rates, and the current U-4, U-5, and U-6 rates all include discouraged job-seekers. One could also look at the employment-to-population ratio, which some economists like better because it’s hard to know who is truly out of the work force by choice.

    I absolutely do not think it’s plausible that the government cooks the books on unemployment so as to make the economy look good. (If they do, it sure isn’t working. And why publish all these numbers like the U-6 unemployment rate that people can use to make it look bad?) There’s virtually no evidence to support this conspiracy theory, whereas in a huge organization like the BLS something surely would have leaked out by now if it were true. Pres. Nixon was even convinced that a “Jewish cabal” in the BLS was out to get him by making the unemployment numbers look bad.

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