Percentage decline in employment in recessions since 1970 (chart)

Paul Krugman
July 28, 2010, 8:28 pm
We’re Number One!


I’ve seen a peculiar meme surfacing here and there lately — the assertion that people like me are exaggerating how bad our current difficulties are, that things were actually worse in the 70s and 80s. I wonder where that’s coming from — and I really do; it has the feel of one of those things being disseminated on talk radio or something, and I think I hear a faint chant of Jimmy Carter! Jimmy Carter! in the background.

Whatever. The truth is that this really is the big one. Catherine Rampell recently updated the recession comparison chart, showing declines in employment. Here’s the percentage decline in employment in recessions since 1970:






http://krugman.blogs.nytimes.com/2010/07/28/were-number-one/

:banghead:

You're trying to change the playing field from "how bad were things in absolute terms" to "how far did they drop from the prior peak."

It's entirely possible for things to have been worse in 1981 (in absolute terms), but have that be less of a drop from 1980 than the current decline is from 2007.

Something that makes deception possible is not deceptive if not used to deceive.

It is *possible*, from looking at one chart, for things to have been worse in 1981. But things are worse today in reality, as confirmed by any metric one choses.

The chart in the OP is not offered as singluar proof of something. It is, however, the only one of the three charts at the link that is a jpg. rather than png. and the png. charts don't insert ceorrectly into DU posts. So that is the one of the three I chose to illustrate the link.

(The duration of unemployment chart is more shocking.)

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It is *possible*, from looking at one chart, for things to have been worse in 1981. But things are worse today in reality, as confirmed by any metric one choses.

I choose inflation. So much for that theory. :)

The chart in the OP is not offered as singluar proof of something.

Perhaps not, but it was offered as evidence that those who think that 1981 was worse are wrong... and the graph does not support that claim. It would support a claim that the drop was not as far in '81, but ended up worse.

Imagine for instance that we have the much-predicted "double-dip" recession right now and the traditional measure of unemployment falls to 13%. Well... if graphed on that chart it would look like one of the mildest declines... but it would still be worse than our current situation. "Better" or "worse" must compare the current data to that of the prior period, not compare the delta between each and some then-prior period.

It is, however, the only one of the three charts

The second one clearly showing that 1981 was worse.

The third chart being the point for interesting conversation. This recession (as Bush's first) showed an interesting gap among job-losers. The long-term unemployed were more likely to stay unemployed than in prior recessions (and conversely, those who were only out of work for a few weeks were more likely to find new work quickly).

What can accurately be said from the third graph is that structural unemployment is more prevalent this time and not just frictional or cyclical unemployment.

recession of 2001-5. We barely got out of that before the whole thing cracked up again. A broader perspective might hold that we have been in a prolonged economic downturn since 2001, and that there is no end in sight.

The 2001 drop in employment and the 2008 drop in employment began from times of very low unemployment.

The Carter and Reagan recessions began from periods when there was already a high unemployment rate in the economy. The whole of the 1970s was crap.

You are correct that the current unemployment spike started from a lower rate than in 1981, but not as much as you might think. Unemployment cracked 4% on the downside momentarily at the end of the Clinton administration. Under Bush unemployment was never great.

Yes, the absolute unemployment trough at the start of the current move was about 4.5%--the lowest point of the Bush era. The Bush presidency averaged 5-6% unemployment so I don't know that it was a period of "very l0ow" unemployment.

Also, rate of change does matter in terms of effect. Measured from the previous unemployment trough today's move is smaller than 1981. Measured from the previous unemployment peak today's move is much larger than 1981.

2001-2009 is famous for creating almost no jobs. As you'll recall, we talked about this throughout the Bush presidency. The only reason unemployment briefly reached 4.5% under Bush was the climax of the housing bubble. That rate was achieved despite a famously horrible job creation record.

The 21st century economy wasn't creating many jobs at its best. It is less able to handle this than the world of 1981 was, and the median duration of unemployment tells the tale:

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Today is worse than 1981 all around.

_______________

"But wasn’t the unemployment rate higher in the past? Well, in 1982, although not in the 1970s, it was briefly a bit higher than the peak this cycle:

?&chart_type=line&graph_id=&category_id=&recession_bars=On&width=480&height=288&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=true&fo=ve&id=UNRATE&transformation=lin&scale=Left&range=Custom&cosd=1960-01-01&coed=2010-06-01&line_color=%230000FF&link_values=&mark_type=NONE&mw=4&line_style=Solid&lw=1&vintage_date=2010-07-28&revision_date=2010-07-28&mma=0&nd=&ost=&oet=&fml=a

But back then the “full employment” level of unemployment was higher, so the increase wasn’t as large; more important, most of the unemployment was short-term, nothing like the deeply corrosive long-term unemployment we’re facing now:


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Whether 4.5% or 5-6%, they all count as "low" by historical standards. Bush doesn't get (or deserve) credit for that because it was clearly a decline from the prior administration.

is still in the pits.

Take a look- county by county, here:

http://www.nytimes.com/interactive/2009/03/03/us/20090303_LEONHARDT.html?ref=economy