Kevin O’Rourke and Barry Eichengreen have shown, at regular intervals since the start of the year, that whether one looks at world output, world stock markets or in particular world trade, our current recession is every bit as “great” as the Great Depression. (For those who ponder the use of ‘great’ when talking about things like depressions and recessions, which don’t sound great at all, I refer you to the first quote here, a fantastic definition of ‘great’ given in the Simpsons.)
Of course, global metrics of trade and output are one thing, but people are – understandably – often a lot more exercised by more tangible metrics such as jobs lost. Nancy Pelosi, earlier in the year, used to great effect a graph of the absolute number of jobs lost, one the has since been modified and extended by a number of economists. One just out, hat tip Kevin and the Irish Economy blog, is Calculated Risk’s comparison of every recession from 1948 on, by percentage of job losses.
Last February, I made my own modifications to the charts going around at the time, in particular (1) narrowing the focus to private sector employment, (2) averaging over the four recessions between 1948 and 1961, which were very similar in nature, and (3) trying to use colour to make the graph more intuitive. The findings included the observation that US recessions measured in job terms have been getting rarer, milder but longer, and that this recession mixes the length of recent recessions with the severity of post-war recessions.
Half a year later, it’s probably time to update the chart and see where we are. The chart is below. Quick guide for reading the chart: (1) the further down a line goes, the higher the percentage of private sector jobs lost, (2) the further a line goes to the right, the longer it took to return to pre-recession employment levels, (3) colours: blue = pre-1990,brown = post-1990, darker = more recent.
The last time I did this chart, the line for 2008/09 – darkest brown – was still heading south. While a mild recovery did look like it was on the cards early in the summer, it now seems that jobs are still being lost at a sigificant rate, in year-on-year terms. In total, 7.3 million private sector jobs have been lost in the last two years. (Or is it eight million? Donald Marron discusses the difference between the estimates.)
When could the US expect to reach 2007 employment levels again? The last recession (2001-2003) occurred when the labour force was of roughly similar size. When the upswing came, it typically came in the form of 220,000 new jobs a month (averaged out over the year). At that rate, if the US economy has truly reached the bottom by now, it would take 33 months to get back to 2007 levels.
However, it reasonable to assume that the rate of recovery may be a bit slower than a credit-fueled bubble. If, say, 150,000 new jobs were created each month instead, it would take four years from now until 2007 employment levels would be reached again.
So, looking at job losses, if this is a recession, it’s the worst recession the US has seen since World War 2… but is this a depression, using a jobs metric? I haven’t had time to crunch the numbers myself, but Dartmouth’s Doug Irwin, via the Curious Capitalist blog on Time magazine, provides the answer with the graph below:
In their words, “not even close”.
From my research a couple of years ago on interwar labour markets, I have comparative estimates of unemployment across two dozen economies from the mid-1920s to the outbreak of World War 2. So what I hope to do next is extend the comparison of “now” and “then” to a proto-OECD. It will be interesting to see if unemployment is worse now in any economy than in the 1930s.