Bob Cropf

Job losses in line with earlier recessions

In economics, Unemployment on March 13, 2009 at 7:21 AM

For all the talk about this economic downturn being the worst since the Great Depression, most economists who study this kind of thing say that the data so far resembles 1981-82 recession ( see Fox and Polley). The charts on the two sites show a close resemblance to earlier recessions. Polley says the current downturn is demand-driven. Based on this interpretation, he argues that the recession will probably last at least another year. On the bright side, he suggests that we should be back at peak employment in 24 months.

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  1. I hope so! But I worry that is impossible to tell until it totally bottoms out. Yes, the slope is similar but the trough could still end up being much lower. This may also be an artifact that we really aren’t too long recovered from a very prolonged recession in 2001. Looking a payroll change does not include marginally attached workers (discouraged, newly entering, underemployed), which might be higher as a result of the 2001 recovery having been so prolonged. Possible evidence: unemployment is traditionally a leading indicator – personnel is a big cost and fairly easy to cut. This go-around it has been a lagging indicator, there wasn’t much “fat” to cut so employers waited until they had to make personnel cuts. So did previous recessions’ “fat” not make it back onto payroll to get cut this time?

  2. I tend to agree that we really don’t know when this thing is going to bottom out. I’m not convinced that the recent past provides an accurate predictor of the contours of the current crisis. There are some similarities (identified in the articles) and then there are some obvious differences too (some of which you discuss). I didn’t want to be overly pessimistic so I included those articles as providing some rays of hope amid all the gloom.

  3. Here’s another link (http://www.marketwatch.com/news/story/worst-job-losses-60-years/story.aspx?guid={3DD6787D-0D70-4B14-94EC-808F4212D419}&dist=msr_2) to a story about the job losses and the depth of the recession.

  4. This should be called the “Great Recession”.

    I don’t know the source on this thought, but if there’s any money in it feel free to source this blog with my initials next to it.

    Homo economicusly yours, Kevin

  5. What is the difference between the payroll survey and the household survey referred to in Polley’s article? Are they contacting households to gauge the decline of hours worked?

  6. Good question, Chris. I guess we can go to the source in both cases. I’ll try to do this before class on Wed

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