This morning, David Leonhardt asks:

Is the economy only a little worse than it was in the last couple recessions, as some have said, and still a long way from the dark days of 1982? Or are we instead on our way toward something that may even approach the severity of the Great Depression? Without more specifics, it is hard to judge the staggering stimulus numbers being thrown around Washington. It is hard to know how tough a task the Obama administration is facing — and whether it’s running the risk of being too timid or too aggressive.

I thought it would make sense to get some clearer historical perspective, and the economists at the Bureau of Labor Statistics were nice enough to help me do so. In the last week, they helped me put together a broad measure of the job market — one including both official unemployment and more subtle kinds — stretching back to 1970. Since the job market covers the entire economy and affects families in tangible ways, it seems to be the single best yardstick.

And it shows, for starters, that the economy is not yet as bad as it was in the early 1980s. It’s not even that close to being as bad. The ranks of unemployed and underemployed, controlling for the size of the population, were much larger in 1982 than today.

Many people would disagree with the statement that 1982 was worse than 2008-09 is. But I think David is onto something when he notes:

First, the economic expansion that just ended wasn’t as good as the 1970s expansions. The ’70s get a bad rap, and deservedly so in many ways. But median family income still rose 2 percent during the decade, after adjusting for inflation. Over the past decade, it has fallen.

Second, people seem to understand that the worst is yet to come — that the economy has not yet worked off its excesses.

Nice chart, too

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via NYT

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Source:
The Economy Is Bad, but 1982 Was Worse
DAVID LEONHARDT
NYT, January 20, 2009 http://www.nytimes.com/2009/01/21/business/economy/21leonhardt.html

Category: Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

19 Responses to “Economy & Joblessness: 1982 vs 2009”

  1. Bruce N Tennessee says:

    Um, David. You are looking at 1982 as the finished product. In reality, we’ve only been in this severe aspect of the downturn since September and the “end of the world” speeches by Paulson on tv…let’s see where we are in September. I think in this accident our vehicle hasn’t even come to a stop yet…

  2. jsgarber says:

    First we had BSC and LEH say that their capital was adequate. Now we have FDIC Chair Bair saying the banks’ capital is adequate. Is it time to be worried?

  3. jlj says:

    Somehow I do not think that the BLS numbers include very many of the 12+million illegals in the country. Wonder how many of those “shovel ready” jobs in the stimulus package will be going to whom. Haven’t heard much about it, but look at how Mexico is falling apart – turning into a 3rd world narco state. How would our economy take in another 12+ million illegals streaming over the border if Mexico becomes the Latin/narco Somalia? Heck what will Florida do if Raul sends the 100-500k homeless people from the hurricanes the last two years on a boat ride to Miami?

  4. call me ahab says:

    we had a stronger manufacturing base in the 1970′s and 1980′s could be the reason why employment recovered more quickly in that period. As the factories production increased they needed to re-hire the laid off workers to man the factories. Also- I think we have a ways to go before the end is in sight regarding our current crisis and recession- IMO it is going to be a long hard road. Maybe once the dollar tanks we can crank up what factories we have left. That is where the wealth is created- we can’t keep living off the wealth made by previous generations.

  5. VoiceFromTheWilderness says:

    If everything is so hunky dory, then why are we giving away a trillion dollars to the banks? We didn’t do that in 2001. We didn’t do that in 1992. We didn’t do that in the 80′s, and we didn’t do it in the 70′s. So what gives? Maybe the ‘crisis’ is a manufactured one that really isn’t all that bad but makes great scary news stories, and great fodder for getting banks out of the consequences of their own bad decisions?

    I don’t actually believe that, I think we are in deep doo. But you can’t have it both ways. You can’t be propping up corporate america at something like 100 times (in dollar volume) anything that has ever been done before, and then turn around and say, well, this is really like the 1990′s, no where near as bad as those scary 80′s. If I remember correctly the first Chrysler bailoutwas something like 10 billion dollars all told. The S&L crisis? the numbers are still comparable, but it is well known that RTC made the S&Ls feel some pain, i.e. fold, by the 100′s or 1000′s.

    Or wait? Is the purpose of this little piece, to attempt to placate the plebes? Is it an attempt to spin their experience so that they feel that it’s OK that the US Government has finally achieved it’s long sought goal of welfare for corporate america, that it’s OK that they and their children will spend decades if not a 100 years paying for the grand and glorious opportunity to create a new aristocracy of complete and total criminals? There there little man, don’t you fret none, things aren’t so bad, it could be big bad 1981. Is it an attempt to keep the society hinged (the opposite of un-hinged) while the entire structure gets remade in the image of corporate wet dreams?

    Yup, that sounds about right.

    The endless hyping of extravagant metaphors and linguistic maneuvering to make a story sound how you want it to sound that typify the modern press creates a meaningless echo chamber of metaphor duels that purports to be information, but is in reality, writing as spectator sport.

  6. donna says:

    I graduated college in 81 and my husband in 82. At least in software engineering, there was no problem getting a job, although the firms we went to work for did have layoffs.

    These days I worry a lot about what the kids who can’t get jobs and can’t even get a slot in the underfunded colleges to go to school in California are going to do. I’m paying out of state tuition to send my eldest to University of Arizona, but if CA doesn’t wake up soon and find a way to fund education, we’re going to be hurting even more badly. I can’t tell you how angry I am at that idiot Arnie right now.

    I have one friend who has been out of work over a year in Los Angeles. I’ve been paying his car loan so he could at least keep looking for work. We must get people back to work soon — it really is a far worse crisis than the numbers make it appear. I’m normally a consultant, but these days we are well enough off I just stay out of the market so perhaps someone who needs a job can get one. Still, I may be going back to work soon just to pay out of state tuition — this last round we put on our equity line…

  7. @ voice in the wilderness:

    The scare tactics about the danger to the economic system if the financial system failed was:

    1) the greatest fraud ever perpetuated on the American public (w/ the possible exception of Iraqi WMD’s; the Gulf of Tonkin; the Maine, etc);

    2) The method by which federal government power, even in the face of no existential threats–the protection from which is its raison d’etre–is being centralized and magnified.

    Anybody that thinks this little economic hiccup looks anything like ’82 wasn’t alive back then or wasn’t paying attention. This is just a bunch of investment bankers that got caught with their shorts down. But the government has convinced the sheeple that if we don’t save them, it’ll be our ox that’s gored. Bunk.

  8. call me ahab says:

    @ voiceof the wilderness- exactly! The pitch is to engender a sense that things “aren’t so bad” and “have been worse” to instill wishful thinking in prospective investors so the stock market does not implode further and the money managers can make their dime.

  9. charlie1939 says:

    All comment aside, is the jobs data used by David Leonhardt CORRECT??? Are the metrics he uses for unemployment the same for 1982 and 2009? Or is the 2009 data massaged in different ways than the 1982 and earlier data?

    Bruce N Tennesee has it nailed too, we are only about half-way through this recession and the layoffs have not yet reached their peak! So the curve has a long way to go to reach bottom…

    BTW, Curmudgeon, this mess started unraveling when the bankers were caught with their shorts down, but the financial legerdemain started in the ’90s and the rot started building from then to 2007 when the whole tangled web started to unravel as all Ponzi schemes do, as we ran out of idiots to buy the garbage CDOs, CDSs and other financially engineered junk.

  10. Bruce N Tennessee says:

    David, they are apparently having severe problems in the Mother Country also:

    http://www.upi.com/Business_News/2009/01/21/Jobless_claims_in_Britain_rise_in_December/UPI-36881232557560/

    Jobless claims in Britain rise in December

    The money quote: “The bad news on the labor market is absolutely relentless now,” HIS Global Insight chief economist Howard Archer said. “Reports of companies laying off workers are becoming more and more prevalent, while an increasing number of companies are folding,” he said.

    David, I would bet you a Starbucks latte that at no time in the GD, or in 1982, did we see this kind of extremely rapid erosion on all global economies…and I do remember 1982 well.

  11. David Merkel says:

    The difference is debt. In the 70s, finance across the US was fairly orthodox, and so, jobs snapped back pretty quickly after recessions. The recessions cleared out the bad debts, and the economy could grow again. But after Volcker, monetary policy got too loose, and rode to the rescue of bad debts. Progressively, more bad debts accumulated, leading businesses to be slower to add jobs.

    Now we have little choice. Debts must be paid down, compromised, written-off, and the deflationary effect will mean that jobs won’t bounce back soon. We may challenge the unemployment levels of the early 80s.

  12. I don’t think there’s any chance of broad-based improvement until trust/credit comes back, and that’s not going anywhere until MBSes and related derivatives get written down or destroyed as a necessary but not necessarily sufficient requirement for legitimate economic confidence.

    When do you think the politicians will let that happen? Or will it just happen naturally when the final collapse happens, and at that point, who will actually be left to care?

  13. Bruce N Tennessee says:

    David:

    Agree, debt is the problem, and when debt is eliminated the Jenny Craig result can be eye-popping:

    http://alphaville.ftdata.co.uk/lib/inc/getfile/4156.jpg

    From Barry’s bud, Paul K.

    (and these banks are still really Zombies, at least as I think of them..)

  14. me says:

    @charlie1939
    is the jobs data used by David Leonhardt CORRECT??? Are the metrics he uses for unemployment the same for 1982 and 2009? Or is the 2009 data massaged in different ways than the 1982 and earlier data?

    Apparently not. It looks like not even 2/3 are elgible today for unemployment compared to 26 years ago.

    “It’s worth noting that our workforce has expanded considerably since then. That week 26 years ago, the insured employment rate (the percentage of workers eligible for unemployment insurance who are collecting benefits) was 5.1 percent. The rate last week was 3.3 percent. ”

    http://www.usnews.com/blogs/the-inside-job/2008/12/11/573000-initial-claims-for-unemployment-insurance-last-week.html

  15. Mannwich says:

    @David Merkel: Agree with you that the difference this time is the mountain of debt. That’s the biggest issue in this fiasco.

  16. Marc399 says:

    True, true.

    A couple of points:
    The level of debt today and its derivatives are unprecedented.
    The deficit is completely out of whack.
    Interest rates are as low as the Fed can make them.
    The entire US auto industry is on the verge of bankruptcy.
    I haven’t heard any company say that they’re actually seeing better business conditions.

    An exercise for the reader: What happened in 1982 that turned the economy around and are conditions today present so that the same thing can happen?

  17. Pat G. says:

    Okay, I’ll bite. 12% of 2008′s total population would be 36,420,000. 16% of 1980′s total population would be 36,246,000. I feel much better….

  18. nayyer ali says:

    Another difference is that the economy was much more industrial/cyclical in the early 1980′s, so there were more factory layoffs that would also rehire the same workers rapidly when recovery took hold. Now it seems recession leads to a higher fraction of permanent job losses, and employment recovery is more dependent on growth in other/new firms that hire the laid off workers. As this means switching industries it also results in reduced salaries for many in their new jobs, and there is probably some stickiness as the laid off auto workers need to be retrained as respiratory therapists etc. Which might explain why the recessions have become more U shaped than V shaped in employment terms over the last few decades.

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