Our earlier discussion about “Job Losses in Post WWII Recessions” raised a few questions about the extent and depth of the job loss in recessions relative to population and labor pool.

He is a completely different way to visualize this: How long it took each recession to recover to the prior jobs peak.

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Post WWII Recession Job Recoveries (Months)

Are recessions taking longer to recover from? It certainly appears that way, at leatsd for the past 3 recessions. Each took longer to return to pre-recession employment levels than the prior contraction.

This version normalizes for the 2001 Outlier:

Thanks to Bill of Calculated Risk for whipping these us for us . . .

Category: Data Analysis, Economy

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.

28 Responses to “Post WWII Recession Job Recoveries (Months)”

  1. Paul S says:

    IMHO we never actually got out of the 2001 recession- the credit bubble simply offered the illusion that we were.
    That’s my theory anyway.

  2. dead hobo says:

    Yup, it looks like they return at the same rate they went away.

  3. SWMOD52 says:

    So I’m all in cash….how do I invest for a depression? Just buy a bunch of gold? Maybe I should buy Panzer’s book and a fist full of Xanax.

  4. Robertm73 says:

    http://doomisnigh.blogspot.com/2009/02/thursday-sept-18-must-read-of-day.html
    if you have not read this story you should, the US almost collaped on Sept 18th
    Also I think there is typo in the last sentance. “us for us”

  5. dryfly says:

    “Are recessions taking longer to recover from? It certainly appears that way, at leatsd for the past 3 recessions. Each took longer to return to pre-recession employment levels than the prior contraction.”

    :: ::

    I would say ‘yes – recoveries do take longer’.

    I’d say it is due to the increased ratio of ‘overhead’ to ‘direct’ cost involved with every unit of GDP. With high levels of overhead and indirect per unit of output you don’t have to add workers at the same rate as production picks up. As a result there isn’t a ‘mechanism’ to transfer ‘stimulus’ to the rest of the economy now like there used to be 40-50 years ago.

    Example: I worked in a chemical plant where we doubled capacity by ‘de-bottlenecking’ a few highly constrained operations. It resulted in hiring a few extra workers at a plant valued at almost a billion dollars.

    Now w/ office software & ERPs the same thing happens in ‘white collar’. Organizations can ramp up ‘output’ like crazy with few additional workers so even if they see business picking up there isn’t an immediate need for more workers and the ‘multiplier’ from stimulus (whether tax cut or spending or rate cuts) is very muted.

    JMHO.

  6. newcreature says:

    It would be interesting to see these charts after they take into account the new unemployment reporting rules implemented by various administrations. If you go to http://www.shadowstats.com you can see what the actual numbers are for unemployment, CPI, GDP an several others when the old formulas for calculating these metrics are used.

    NewCreature
    <

  7. newcreature says:

    I just did a rough eyeball comparison and actually if you look at the drop in employment over the past 13 months, the delta is more like 6% instead of the about 2.5%. That makes the graph look much different for sure!

    NewCreature
    <><

  8. dryfly says:

    “I’d say it is due to the increased ratio of ‘overhead’ to ‘direct’ cost involved with every unit of GDP. With high levels of overhead and indirect per unit of output you don’t have to add workers at the same rate as production picks up. As a result there isn’t a ‘mechanism’ to transfer ’stimulus’ to the rest of the economy now like there used to be 40-50 years ago.”

    :: ::

    Let me clarify – this ‘muted’ response to ‘stimulus’ holds true UNTIL you reach a new ‘capacity’ constraint or bottleneck – once that level is reached then additional stimulus generates a large marginal multiplier… the function in effect is best described as a ‘stair step’.

    Again – JMHO.

  9. ottovbvs says:

    There was an interesting piece in the WSJ today on the potential for a rapid snap back at the end of a recession. It wasn’t addressing employment but GDP recovery and the pattern is for a very rapid recovery which has happened with every recession since the war. A fascinating stat they included was the scrap rate for autos. In normal times it’s about 5% which around a million cars a month. The anecdotal evidence they gathered from junkers was this has fallen by about 40% so we’re seeing a potential catch up of 6-7 million cars per year being created.

  10. spigzone says:

    ” It wasn’t addressing employment but GDP recovery and the pattern is for a very rapid recovery which has happened with every recession since the war.”

    With world oil production plummeting 5%+ annually … yeah, I think we can be assured the ‘snapback’ recovery from this recesson will be quite the recordbreaker.

  11. dryfly says:

    “It wasn’t addressing employment but GDP recovery and the pattern is for a very rapid recovery which has happened with every recession since the war. A fascinating stat they included was the scrap rate for autos. In normal times it’s about 5% which around a million cars a month. The anecdotal evidence they gathered from junkers was this has fallen by about 40% so we’re seeing a potential catch up of 6-7 million cars per year being created.”

    :: ::

    The only consumer personal asset more underwater than housing is auto. Ask any dealer how many of the folks asking about a trade in have any equity. It is pretty tough to have much in a car you bought 4 years ago with a zero down seven year car loan.

    As usual the WSJ is wishing more than thinking.

  12. ottovbvs says:

    dryfly Says:

    February 9th, 2009 at 3:58 pm

    ……Well to start with we’re talking about the WSJ reporting which is better than most. And then you might want to consider the elasticity of demand for autos over that for homes. And Autos are much more susceptible to stimulus than the housing market for a host of reasons.

    spigzone Says:

    February 9th, 2009 at 3:52 pm

    With world oil production plummeting 5%+ annually … yeah, I think we can be assured the ’snapback’ recovery from this recesson will be quite the recordbreaker.

    ….It’s clearly escaped your notice that declining oil prices are a positive for the US economy. Duh.

  13. spigzone says:

    And that cold front last week discredits global warming … … right?

    How hard is it to grasp the concept the current worldwide economic crash created sufficient demand destruction to TEMPORARILY overtake declining oil production? And when the 5%+ annual decline overtakes THAT demand destruction the world will be back to spiking oil prices WHILE it’s in an economic depression.

  14. R. Timm says:

    At first glance this chart makes it look like we’re in an ordinary middle of the road recession severity. I think the major difference is not reflected in the number of employed. The numbers fail to demonstrate the number of underemployed and workers forced to go part-time.

    Another factor in this recession is the state of American balance sheets are far worse than in past recessions. Real income declines contributed to negative savings rates. The stock market crash and housing crash diminished the majority of any meager net worth that was accumulated. The average American household was barely getting by during the boom and is now ill prepared for this recession no matter the severity or duration.

    BR & CR: Great data presentation and analysis from two of my favorite bloggers. Good to see you working together.

  15. km4 says:

    As I said in previous thread I don’t see many of these jobs coming back in light of continued outsourcing and downsizing where other nations are competing better and smarter for jobs. We’re in the 21st century ‘knowledge economy’ so BOL to many many Americans looking to make more than a $40-50K service based job.

  16. “And when the 5%+ annual decline overtakes THAT demand destruction the world will be back to spiking oil prices WHILE it’s in an economic depression.”

    Dude, chill out. Of course oil prices will spike soon enough. But it will be for the same reason they spiked before. Oil is priced in dollars, or more appropriately, dollars are priced in oil. Once the presses get cranking w/ $2t or so of deficit spending, oil will pop, along w/ other commodities (like before), no matter the supply and demand fundamentals.

    And of course, in a fiat currency regime, it’s quite easy to have recessions/depressions and inflation. All’s you gots to do is print.

  17. dryfly says:

    “Well to start with we’re talking about the WSJ reporting which is better than most.”

    Most what? I think ‘The Shopper’ has better business reporting then the WSJ nowadays. Talk about ‘capture’… the WSJ is captured by their advertisers. It is far from unbiased and no longer objective if it ever was.

    And to make autos return, stimulus would have to make the debt the average consumer has *GO AWAY* – a significant segment of Americans are underwater on their cars & loans and there is NO collateral value in the autos at all – nothing left but the debt. Repo loss rates are near 100% on these vehicles. I talked to a repo guy today about it.

    BTW I work in the auto supply chain NO BODY I talk to sees a near term rebound in the build for years to come UNLESS gov’t virtually writes down consumer debt associated w/ auto loans. Even if the cars are trash – the consumer doesn’t have the wherewithal to buy new. Until that changes ‘automotive’ is dead.

  18. spigzone says:

    “Dude, chill out. Of course oil prices will spike soon enough. But it will be for the same reason they spiked before. Oil is priced in dollars, or more appropriately, dollars are priced in”

    http://www.arabianbusiness.com/545723-oil-output-could-fall-by-30m-bpd-by-2015—

    Reality can be such a bitch.

  19. Mark Goldes says:

    Up to 6 million jobs and 4 million small businesses can be created by A Human Investment Tax Credit Program.

    This is missing from the stimulus package.

    One component, a jobs tax credit, became law for one year and generated more jobs in less time than any legislation in our history.

    Two versions of the 2009 Report can be downloaded free at: aesopinstitute.org

    The full Report contains a post Keynesian economic analysis.

    The short version includes only what can be done and how Congress can do it.

  20. skardin says:

    “IMHO we never actually got out of the 2001 recession- the credit bubble simply offered the illusion that we were. That’s my theory anyway.”

    Agree, I 2nd this. There are some differences, 2000-2001 dot.com crash affected certain specific sectors and not as wide spread as the current one.

  21. markbnj says:

    Here’s a few other points to chew on:

    1) I think that the financial problems are now only showing the 25% of the iceberg that is above water (the sub-prime problems). I predict that the rest of the problem will ONLY start to show as the CDO and collateralized debts made from (credit cards, car loans, student loans) START to go bad. (look HERE for that prediction…(http://sos-newdeal.blogspot.com/2009/02/no-more-cdos-start-now-stop-now.html )

    2) we ABSOLUTELY (as a country…/world) need to absolutely ban the practice of making CDO’s out of other items. This is the absolute cause of this entire crisis, and NOTHING will go back to normal until this is doen.

    3) BTW, I predicted this financial crisis (fwiw) over 2 years at my blog. I also came up with a BUNCH of ideas, based on the first depression (FDR) on how he got us out… Look HERE…http://sos-newdeal.blogspot.com/2009/01/new-start-beginning-and-restatement.html

    please feel free to comment…

  22. Bruce in Tn says:

    @Paul S:

    If we were never out of recession, then what is going on in Japan?

    Lost decade?

    http://www.rttnews.com/CorpInfo/EconomicCalendar.aspx

    2/9/09 1 am. Machine tool orders are now down 85% from one year ago…that means that that industry is only 1/6th of what it was a year ago in the world’s second largest economy…

    I think I will wait a little while before I decide Obama and Timmmmmaayyyy are getting the world out of this mess…

  23. bobc7i says:

    No worries, one of the benefits of the offshoring of jobs is that it frees up labor for higher-value jobs onshore. Once that job growth kicks in we will be fine. That should happen any moment now.

  24. wunsacon says:

    >> BR & CR: Great data presentation and analysis from two of my favorite bloggers. Good to see you working together.

    Yes, I think CR got peanut butter into BR’s chocolate. It’s delish!

  25. wunsacon says:

    LOL, bobc7i! Yeah, r u waiting for “insourcing”, by the way? Our growth prospects never dim!

  26. dgov says:

    Barry,

    Thanks for the update. As your more astute readers might have expected, the amazing qualities of your first chart didn’t quite find their way into your second chart. The job losses, in percentage terms, look downright pedestrian. The numbers will probably get much worse, but we haven’t reached perdition yet.

    dgov

  27. funadvice_editor says:

    Looking at the graphs, it does seem that it’s taking longer. If the trend continues, I wonder where we’ll be in 2100…