How Bad Is It?

How Bad Is It?

By Justin Fox and Karen Tumulty, Time/CNN | 12 February 2009

This bad, House Speaker Nancy Pelosi's office shows us:


Click Here, or on the image, to see a larger, undistorted image.
(If you are having trouble reading the fine print: The blue line shows job losses in the 1990 recession; the red line is 2001, and the green line is the path we are on now.)

To clarify, these are NOT projections. This is actual job-loss data so far.^*

Pelosi's office explains:

"This chart compares the job loss so far in this recession to job losses in the 1990-1991 recession and the 2001 recession— showing how dramatic and unprecedented the job loss over the last 13 months has been. Over the last 13 months, our economy has lost a total of 3.6 million jobs— and continuing job losses in the next few months are predicted. "By comparison, we lost a total of 1.6 million jobs in the 1990-1991 recession, before the economy began turning around and jobs began increasing; and we lost a total of 2.7 million jobs in the 2001 recession, before the economy began turning around and jobs began increasing."

^*Pelosi's office says they used Bureau of Labor Statistics numbers.

Justin Fox looks further back, and puts the recession in percentage terms.

Comparing This Recession To The Last Five

The dramatic chart Nancy Pelosi's office put out comparing job losses so far in the current recession with those in 2001 and 1990-1991 has gotten a lot of play on the Internet. As well it should— it paints a dramatic picture (job losses in the current recession have been much more severe). But we already knew this recession was a lot worse than the last two. It would be far more informative to have comparisons with the deeper recessions of 1981-1982 and 1974-1975. So here's a chart of what happened to payroll employment during every recession since the mid-1970s. I've done everything in percentage terms because there are a lot more people in the labor force now than in the 1970s, but otherwise followed the format of the Pelosi chart:


Click Here, or on the image, to see a larger, undistorted image.
Graphic by Feilding Cage/TIME.com

What do we learn? So far the fall in employment is comparable to that in 1974-1975 and 1981-1982. If the comparison holds, the declines should end within the next four or five months. But we of course have no idea whether the comparison will hold. Past performance is no guarantee of future results.

Another lesson brought home by the chart is how weak the recovery from the 2001 recession was. It was a mild recession, but it took four years for employment to return to its February 2001 peak. Setting aside the worst-case scenario of a continued downward employment spiral that puts 1974-1975 and 1981-1982 to shame, a recession that combines a severity akin to that of 1974-1975 and 1981-1982 with a recovery as anemic as 2001-2002-2003-2004-2005 would be not a whole lotta fun.

Update: Economist William Polley beat me to this, and includes in his chart every recession since World War II. That makes the chart pretty hard to read— but it's still worth a look.

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Normxxx    
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