Not to knock the mainstream media, I read it daily. But news reports tend to follow herd mentality. When the economy is booming, there’s usually a preponderance of bullish news. When we’re in a recession, there’s just the opposite amount of bearish news.
So, when I find more rational news reports based on actual data, I tend to place more value that information. With that in mind, I’d like to tip my hat to Scott Reeves at Minyanville for pointing out a recent historical perspective conducted by The Federal Reserve Bank of Minneapolis.
As recent history has shown, Federal Reserve opinions are a pretty poor reference (except for Frederic Mishkin) for economic forecasting, but I believe their data are an excellent source for reporting economic history. The following charts present an interesting comparison of our current recession’s percent change in employment with those of the 10 previous recessions that have occurred since 1946.
According to The Federal Reserve Bank of Minneapolis:
This page provides a current assessment of “how bad” the recession is relative to past recessions. It will be updated as new data are released. This page does not provide forecasts and the information should not be interpreted as such. The following charts provide information about both the length and depth of recessions.
While often being reported as the worst recession we’ve had since the Great Depression, when taken in this frame of reference, our current economic crisis “so far” hasn’t actually reached the severity in length and depth of half of our last 10 recessions. Just something to think about.
Comments 3
Interesting comparison graphs on employment! Clearly employment has shrunk very slowly in the first months of this recession meaning, from this perspective, it looks much like a “median” recession. However, look at the rate of change in employment in the last 6 months – its rate of fall is much faster than earlier and this rate is accelerating.
Also worth bearing in mind that employment is a 3-9 month lagging indicator compared to say real GDP or retail sales and that retail sales have been decreasing 2-3% a month (yes a month!) for the last three months and that this rate of decrease is also accelerating. So given employment’s lag we should expect the employment to keep falling at the current rate or faster for at least 3- 9 months even if retail sales turned around in January. Given that that rate of change in retail sales or real GDP is inevitably not going to turn positive in the next 3 months and probably not for at least 6 months (and possibly much longer though stimulus will give some positive bumps) we’re looking at a that employment graph heading south at the current rate of decline for 9 to 15 months. That will take the current decline in employment to worse than the harshest recessions on this graph in terms of total loss of employment. It will also mean the length of time from the start of recession until it begins to sustainably turn around (maybe somewhere between months 21 and 27 on that graph) would be much longer than longest recession. So employment held up well early but it’s going to get uglier than in living memory and looks like living up to the “worst post war recession” hype.
Agree though that the gloom and doom in the mainstream media is herd like and kind of annoying. I have more detailed thoughts on the economy and equity markets at http://reflexivityfinance.blogspot.com/
I enjoy you blog and always interested in a contrary view!
Cheers
Posted 19 Jan 2009 at 7:27 pm ¶Steve
Via some Bozzo at CNBC, Why This Recession Seems Worse Than ’70s and ’80s
IMO, the main reason it seems so bad is because of our advances in technology. In the 70′s and 80′s, we didn’t have the ability to quickly and easy communicate immediately with each other.
Back then, you didn’t see anyone walking around with a BlueTooth stuck in their ear. Everyone didn’t have a cell phone, a computer, email, RSS, and a personal weblog which are so prevalent nowadays. There weren’t a million news services dedicated (and competing) to covering every source of the financial hemisphere. Remember, the 8-Track player was state-of-the-art back then.
There weren’t the same amount of “individual” investors in the 70′s and 80′s as there are today. Average Americans didn’t have the easy and low cost means to trade stocks, bonds, and everything else under the sun as institutional investors had.
Most individuals also didn’t have the same amount of money invested in 401k’s, IRAs or other investment vehicles, as some of these investment vehicles were just coming into existence at that time. Remember, the S&P 500 Index wasn’t created until the late 70′s.
So, when you get to thinking why it “seems” so bad, it’s because technology has caused us to be overly-inundated with information from multiple sources, and tends to make the good stuff seem better, and the bad stuff seem worse.
Posted 13 Feb 2009 at 11:02 am ¶Here’s the updated chart:
Posted 30 Jun 2009 at 11:17 am ¶http://www.openleft.com/upload/job-losses-post-ww2.png
Guzzo get with it!
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