New York Times: The Economy Is Bad, but 1982 Was Worse
Is the economy only a little worse than it was in the last couple recessions, as some have said, and still a long way from the dark days of 1982? Or are we instead on our way toward something that may even approach the severity of the Great Depression? …
… I thought it would make sense to get some clearer historical perspective, and the economists at the Bureau of Labor Statistics 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. …
… So suffice it to say that the serious recent declines in retail sales, business spending and employment make it highly unusual that the economy will improve anytime soon. The job market will almost certainly continue to worsen for most of 2009. Even if the much-needed stimulus bill passes, the economy is likely to end the year in roughly as bad a shape as its 1982 nadir. Which is saying something. …
So why are public opinion polls showing Americans to be even gloomier about the economy today than they were back then? I think there are two main reasons.
First, the economic expansion that just ended wasn’t as good as the 1970s expansions. The ’70s get a bad rap, and deservedly so in many ways. But median family income still rose 2 percent during the decade, after adjusting for inflation. Over the past decade, it has fallen.
Second, people seem to understand that the worst is yet to come — that the economy has not yet worked off its excesses. …
There is more to the story about his point about median family income falling over the last decade. Family characteristics have been changing in recent years. The average family size has declined slightly. There has also been a widening of differences in family size between the top and bottom quintiles of family income. It is now 3.1 on average for the top quintile and 1.9 for the lowest. Considering these factors, per capita income (as opposed to family income) has been rising.
I think there is a third reason for the gloominess, which the author alludes to in the article. Almost half the U. S. population is not old enough to remember the recession in the early 1980s. I graduated from college in 1981. I remember it! Those younger than me have no personal baseline to compare our current troubles. Pre-1980s, and especially pre-WWII, significant recessions were an ongoing pattern. We have become quite spoiled over the past quarter century.
There is also likely a fourth reason. A sensationalist media combined with the arrival of an election year. Some powerful interests have a stake in making things look as bad as they can paint them.
Some comparisons from Mark Perry:
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)
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