Interesting piece using a variety of data series to examine how bad the current downturn. Short version: not as bad as 1982 yet, but in 2nd place after it in the post-Great Depression era.
Nationwide, the unemployment rate rose above 10 percent in 1982, compared with 7.2 percent last month. But that rate has a couple of basic flaws, as I’ve discussed in previous columns. It counts people who have been forced to work part time, even though they want to work full time, as fully employed. It also considers people who have given up looking for work — so-called discouraged workers — to be no different from retirees or stay-at-home parents. They simply aren’t counted.
Years ago, the Labor Department responded to criticism about these issues by creating several broader measures of joblessness. Unfortunately, they don’t exist prior to 1994. But the department was doing similar work in earlier years, which allows the economists who work there to make estimates about how to compare the various survey categories over time. I took these estimates — and they are estimates, not official statistics — and created a measure of unemployment that goes back to 1970.
Including discouraged workers, the measure shows that the unemployment rate was 7.6 percent last month. Another 5.2 percent of the labor force was involuntarily working part time. These two groups bring the combined rate to 12.8 percent.
Even this is an understatement, because the Labor Department’s definition of discouraged workers is a little narrow. To be counted, somebody must have looked for a job in the last year. And there appear to be several hundred thousand people — mostly men — who stopped looking for work more than a year ago but would gladly take a good-paying job if one came along. They would lift the rate above 13 percent.
As bad as the number is, it is still not that close to its 1982 peak of 16.3 percent (or anywhere near its Depression levels, which were probably above 30 percent). The early ’80s really were that bad.
I could have sworn we looked at just this data in another thread, but still just as interesting. I have to be honest Jason, at this point it’s so real and so raw of a deal in the workplace, I’ve become numb to the statistics of it, I just want it to be over before I have the workload of 10 and nobody left at work to talk to.
Man, sorry to hear this is hitting you personally Skipper. So far for me it’s business as usual and all this economic doom and gloom is just something to read about in the newspaper.
We’re at 20% of workforce let go and now playing games with manufacturing floor workers (and unions) in order to cut costs. Strangely it’s the credit problem affecting us most. Consumers are having a hard time with credit to buy large things and no credit for large construction.
I haven’t looked at the Job sites, are postings down at all? Are people still being hired in most places?
My area must be doing alright, because I get about a call a week from random headhunters asking if I’m interested in a position. They all seem genuinely shocked when I say “Yes I’m happily employed and my company is doing fine. No, I don’t know anyone looking for work.”
There’s still work out there for software developers, at least in Boston.
I’m the same way, and what’s odd is that I kind of have survivor’s guilt over it. Oh, not like Skipper would, obviously, but in a more abstract way. I feel bad that I’m NOT being affected by it, at least not noticeably. I mean I sympathize with the people I read about in the newspapers, but it’s almost like sympathizing with fictional people precisely because I am not affected and really don’t know anyone who is.
I work for a retail operation that is currently having its annual sale. We are breaking all our prior sales records and still hiring new employees. We know we did alot of things right that are generating sales, but it seems weird to be breaking sales records this year.
I generally agree that the statistics and certainly the “real economy” haven’t reached the depths of the 81-82 recession. My response is to say “wait”, because I would bet were going to get there and that the nature of this recession and the general differences in the political-economic situation of the world is enough that statistics don’t paint a complete picture(and I’m not claiming the OP said they do.)
Empirically speaking, all of the people I have been talking to that I know who have been around since the 70s, say this is far worse then what they what the industry went through in the 80s. From my own experience, this is my 11th year on wall street, 16th if you count college summer internships, I’ve certainly never scene anything like this. It’s absolutely breathtakingly horrible; from the number of people I know that are out of work, to the number of people I know who will be essentially just a bad off with the decline in bonuses, to the people who after investing the majority of their careers on wall street will have to satrt over doing something they have never done before, etc. Unlike past recessions, the jobs that have been lost in the past year are likely gone forever. In the past the attitude everyone had was “Sit tight until things pick up again, then firms will be hiring”, that logic just doesn’t hold true anymore. By the time we get out this mess and are back to hiring again, the industry will likely have changed so much that those who were out of it will find themselves in many cases unable to get back in.
That sucks and I hate to hear this affecting people you know but the effects of this are going to be felt disproportionately. Just like the IT business was at the heart of the 2000-01 downturn, Wall Street is very close to the epicenter of this recession.
Ya know, I was an adult back in 1982ish, which everyone has said (including Krugman) was worse than what we’re seeing and (in terms of, say, unemployment) worse than what we’re predicting.
But for the life of me, I do not remember the complete declarations and 24 hour bombardment of doom that we hear/feel now. Unemployment hit, what, 16%? A mortgage would cost you 18%. Your salary was dropping like a rock relative to your house payment, CC payments, cost of everything. It was hell trying to get a job or keep one. But I don’t remember the every day, every hour, every moment overwhelming flood of gloom I see and feel now.
Talking with others my age about this, and they agree. The only thing we can figure is the difference in having the internet and cable news etc. Back then, you heard the news on the top of the hour on the radio, and there was the network news on the 3 networks for an hour and that was about it. And I wonder if the non-stop bombardment of “We’re Doomed!” isn’t contributing to the problem.
But I don’t remember the every day, every hour, every moment overwhelming flood of gloom I see and feel now.
No internet. Seriously, the amount of news we are inundated with these days makes everything seem far worse than it really might be. Back in the early 80’s we didn’t have anywhere near the access to news that we do these days.
Shark attacks for example. By all counts, sharks aren’t attacking any more people than they have in the past. The difference is that nowadays we hear about every single one so it FEELS like more.
And I wonder if the non-stop bombardment of “We’re Doomed!” isn’t contributing to the problem.
I believe it certainly contributes to certain aspects of it. Consumer attitudes for example. I can’t imagine the continual bombardment of bad news from the media is doing anything good to attitudes and consumer confidence levels. You can only hear “we’re fucked” so many times before you accept it as fact.
Well, I was born in '82, so this is the worst crisis I’ve ever witnessed. And it’s hitting us at work, basically by compounding an already difficult situation that had nothing to do with the economic meltdown. Non profits that provide healthcare or social services are caught in a vise - demand is up for our services, but our fundraising figures have just plummeted. 30-40% off last year’s totals. Our donors are largely elderly, and they’ve seen their retirement savings vaporize. Large gifts that we typically get from banks or bankers … well, they’re gone, obviously.
FWIW, I have my own “misery index”. I was in high school in 1982 so I do remember that recession. I also remember having the heat permanently set at 60 degrees so my parents could afford the heating oil. I remember several summers where we couldn’t afford to run the air conditioner, and this is HUGE in the sweltering South. I remember specifically budgeting every single trip over 20 miles because the overall impact of gas prices was much greater in the overall family budget. It certainly ‘felt’ worse back then, but this recession is far from over; we may get there.
Yeah, I remember my wife and I and our friends getting Kerosene heaters for the house and wearing blankets in the living room while watching TV, to keep warm while lowering the thermostat. We were renting, because there was no way a young couple like us could buy a house at 16-18% mortgage rates. Finding a job was tough, and the unemployment rates were sky high. There was a general depression in the mood of the country.
But it was far from what it feels like now. You just can’t avoid hearing, around the clock, how we’re in a disaster, the country is in danger of going under, etc. etc. etc. non-stop. It seems to be auto-catalytic and feeding on itself. There’s an almost hysterical tone in much of the coverage that you just did’t get from, say, Cronkite at 6 PM on the evening news. And much of the media seems to almost be enjoying the frenzy of doom.
One key difference I’m seeing now: people with jobs that are fairly secure are feeling panicked - almost no one feels safe. In 82 the unemployment was much higher, yet once your company had their lay-offs and you were in the majority who kept your job, there was a feeling of relief, sucks for my friends, but life goes on and can’t wait for interest rates to come down and the economy to turn around. I don’t recall casual conversations seeming to almost always end up on how horrible things are, no matter what the starting topic. Yeah, consumers aren’t buying now, because they are hearing every moment of every day that the world as they know it is falling apart.
Those 18% mortgages sucked, but remember that was only about a 6% real rate, amusingly, as inflation hit a real rate of 13.5% in 1981. Inflation made strange sets of winners and losers though so it wasn’t “really” a 6% rate, but still.
I suspect the difference in media coverage and popular perception comes down to how terrible stock and housing performance is right now. Why? Well, the media doesn’t give a shit about poor people who get fired, or don’t get raises; their target market in general is the upper middle class and financiers. No really - the coverage on news shows and in papers has no overlap at all with the life of the poor, and little with the middle class. It’s basically the upper middle class and retirees, with some of the middle.
So what are they upset about? Well, their investments have been destroyed.
Peak-to-trough, the S&P 500 dropped about 30% around the 1982 recession. By comparision, we’ve seen a drop of about 60% from 10-2007 to 12-2008 - and we haven’t even hit the trough of the recession yet! I’m not sure where to get comparative housing data, but this housing crash is way worse.
Jason, understand the math on the 18% mortgages, but the real life impact was a full 18% mortgage is what you were having to pay. No one was getting 14% raises, which was another reason things sucked - inflation was WAY higher than your pay raise, so we fell behind.
On the stocks - I also wonder about the chicken and the egg. The market seems far more emotive now than it did back then. There wasn’t the huge percentage drops in the last 3 minutes of the market that was happening almost every day there for a while. I’m pretty convinced that the barrage of constant, overflowing gloom and doom has had some significant impact on the market. In fact, Krugman (an economist who I percieve lets his politics flavor his economic pronouncements a bit too much - but that’s another thread ;) even stated that if we were to lie to the American people and tell them the market had gone up 2000 points you would probably initiate at least a short term bull market due to the emotive base of the market.
