Tuesday, January 20, 2009

The Economy Is Bad, but 1982 Was Worse

I thought it would make sense to get some clearer historical perspective, and the economists at the Bureau of Labor Statistics (BLS) were nice enough to help me do so. In the last week, they helped me put together a broad measure of the job market — one including both official unemployment and more subtle kinds — stretching back to 1970. Since the job market covers the entire economy and affects families in tangible ways, it seems to be the single best yardstick.

And it shows, for starters, that the economy is not yet as bad as it was in the early 1980s. It’s not even that close to being as bad. The ranks of unemployed and underemployed, controlling for the size of the population, were much larger in 1982 than today.

I took estimates from the Labor Department and created a measure of unemployment that goes back to 1970.
Including discouraged workers, the measure shows that the unemployment rate was 7.6%. Another 5.2% of the labor force was involuntarily working part time. These two groups bring the combined rate to 12.8%.


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 fhundred 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%.

As bad as the number is, it is still not that close to its 1982 peak of 16.32% (or anywhere near its Depression levels, which were probably above 30%). The early 1980s really were that bad.

~David Leonhardt in today's NY Times

MP: As I reported earlier, some of the other key differences between today and the early 1980s are:

Prime Rate
1981: 20.5%
2009: 3.25% (Current)

Inflation
1980: 14.8%
2008: 0% (December)

Unemployment Rate
1982: 10.8%
2008: 7.2% (December)

30-Year Mortgage Rate
1981: 18.5%
2009: 4.96% (Current)

Real Gas Price (2008 dollars)
1981:
$3.45 per gallon
2009: $1.82 (Current)

15 Comments:

At 1/20/2009 11:37 PM, Anonymous Anonymous said...

The nadir of 1980 was worse, but we're nowhere near the nadir of this recession. In 1980 we didn't have a global recession or many of our states on the verge of bankruptcy.

You ain't seen nothing yet Prof.

 
At 1/21/2009 12:43 AM, Anonymous Anonymous said...

"You ain't seen nothing yet Prof."

I'll bet we never see the nadir of your pessimism. Nowhere near.

 
At 1/21/2009 5:18 AM, Blogger 1 said...

"I'll bet we never see the nadir of your pessimism"...

Apparently the first anon has a better grip on reality than anon @ 12:43 AM does...

Losing issues outnumbered gainers by about 9 to 1 on the New York Stock Exchange, where consolidated volume came to 6.23 billion shares compared with 5.92 billion shares traded Friday

None the less the market knows a losing proposition when they see one...

 
At 1/21/2009 6:34 AM, Anonymous Ralph Short said...

The states that are going bankrupt, or about to go bankrupt are the big spending, high tax, liberal and democratic party dominated states.

So what does a good liberal do? He/she seeks relief from someone else, i.e. the feds or more accurately all those states and citizens who have lived within their means.

 
At 1/21/2009 8:19 AM, Blogger RightMichigan.com said...

Try telling that to the Barackstar... you listen to that speech yesterday and you'd think we were on the cusp of an end to all we've ever known.

--Nick
www.RightMichigan.com

 
At 1/21/2009 11:35 AM, Blogger @sethstorm said...


The Economy Is Bad, but 1982 Was Worse

In 2008, Wall Street got the damage.

In 1982, Wall Street only began to make use of Reagan's "PATCO precedent" to kill off Main Street.


The states that are going bankrupt, or about to go bankrupt are the big spending, high tax, liberal and democratic party dominated states.

Unfortunately the South will have to pay for meddling with the North. Bailing the North out would be the price.

How about being a bit more strict on job requirements:
Restrict the amount of professions that can require a degree to those that would require it as the primary function.
or:
Citizens who do not possess a degree(but would otherwise meet requirements for attending university) would receive assistance to get them on the path to that degree. If there is to be any repayment, it happens after they have work that makes use of that degree and does so for at least 2-3 years.

 
At 1/21/2009 1:28 PM, Blogger NoWhining said...

This comment has been removed by the author.

 
At 1/21/2009 1:29 PM, Blogger NoWhining said...

This comment has been removed by the author.

 
At 1/21/2009 4:42 PM, Blogger QT said...

Recessions are generally judged in the rearview mirror. We don't know if we have reached bottom or not.

One hopeful sign that we may have passed the hump is that there have not been any major financial tremors in recent months. Nothing that compares with the collapse of Lehman or the banks in Iceland.

Banks still have massive losses and layoffs, TED spread and LIBOR are still a concern, the markets are still highly volatile but it finally appears that the international efforts of central banks around the world are stabilizing the global financial system.

While one cannot be sanguine about the rise in unemployment and the economic downturn being felt across every sector with the exception of health care, some of us are cautiously optimistic that we are past the worst of the financial crisis and deleveraging.

We likely will not know until late 2009 or early 2010 just like the start of the recession was not determined until months after it began.

 
At 1/21/2009 5:34 PM, Anonymous Anonymous said...

It's becuase of Obama, silly. We owe it to him. He's the current president, silly.

 
At 1/21/2009 8:33 PM, Anonymous Anonymous said...

I think that the 82' conditions were induced by the FED to reduce inflationary elements in the economy. In effect, the FED was out to destroy inflation.

If the Fed wanted to, in 82', they could have cut the rates.
What is the FED going to do today? Not any more room to cut rates lower, and the big banks are about insolvent in expert and also the investors eyes.

So I think we can agree that current and 82' are both recessionary, but I think the data shows difference.

 
At 1/22/2009 3:57 PM, Blogger 1 said...

"How about being a bit more strict on job requirements"...

Who should be setting these, 'more strict on job requirements' rules (guidelines?) sethstorm?

The free market does that automatically...

 
At 1/22/2009 7:42 PM, Blogger @sethstorm said...


The free market does that automatically...

I would have to disagree. It does not, and if it was, it is doing it at a very slow pace.

The summary of what I said:
It is something that pits them with having to fund the education by some means on a national scale, or do without being able to consider the requirement or anything that could amount to that requirement.

Yes, there are fields that use that requirement - however, they can be considered as an exception if they can prove it.

 
At 1/22/2009 7:44 PM, Blogger @sethstorm said...

1 says:

Who should be setting these, 'more strict on job requirements' rules (guidelines?)

The government.

Consider it a way to increase the amount of opportunities, and a way to motivate both groups to meet favorably.

 
At 1/24/2009 6:26 PM, Blogger The Intellectual Redneck said...

Bill Gates throws Americans under the bus

Hard economic times are forcing job cuts at many businesses. Most Americans understand that; even if they deplore it. This economic downturn has even hit Microsoft. They are downsizing 5000 jobs. Of the 1400 they cut immediately, 873 were in the Puget Sound area where the company is headquartered. None of the cuts are going to be in India.

 

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