Archive for April, 2010

Where we stand today, in context

Monday, April 19th, 2010

Where are we in this recession, how bad has it really been, and what can we expect going forward?

To answer, let’s examine some key economic variables’ behavior during recent recessions. We can see patterns that are common across the recessions, and we can see the magnitude of the current one compared to the others. Finally, we can get an impression of how far along we are in the recession/recovery cycle.

These charts have been normalized; the data has been scaled so that different recessions are easy to compare as a percentage change from the start of the downturn.

A comparison of economic variables during the five deepest recessions since 1950:

I couldn’t find data for the unemployment claims for the ’57 recession, but I’ve included it in that chart’s legend so the three charts will be easy to compare.
Here we see new unemployment claims, GDP, and total employment for the same five recessions on the same time scale. The claims number is the four-week average of the seasonally adjusted claims. Claims data are refreshed every Thursday morning. GDP is quarterly with monthly announcements first of ‘preliminary,’ then ‘adjusted,’ then ‘final’ values. Employment data is released monthly.

Longsplice Investments: Initial Claims

Longsplice Investments: Recession GDP

Longsplice Investments: Recession Employment

Clearly, the current recession is the deepest of the five in every aspect, and looks likely to become the longest.
We can take comfort that two of the variables are now improving, and the third, the total employment, seems to be flattening out.
Note that the previous longest recession started in Feb. 2001 and featured what we then called the “Jobless Recovery,” long and sloooooooow. Further, in the 2001 recession the GDP barely slipped at all, as recessions go, but the Employment was still badly hurt four years later.

Overall, though, the present data is encouraging. New unemployment claims are clearly declining. GDP has improved for two quarters in a row. Total employment is no longer falling.
Some commentators are calling this another jobless recovery, but in fact the recovery is still just beginning; it’s too soon to expect much growth anyway. We’ll have to wait a few months to see how the employment numbers behave.

Data come from the US Department of Commerce Bureau of Labor Statistics (Employment) and Bureau of Economic Analysis (GDP), and the US Department of Labor Employment and Training Administration (Claims). “Thank you” to William J. Polley, Assistant Professor of Economics at Western Illinois University for providing the idea of comparing Employment.