This Depressing Economy
It's far closer to the dreadful 1930s than you might think.
September 13, 2013 - 12:31 am
According to the Wall Street Journal, the 22 quarters it took for the economy to return to its previous GDP per capita peak is “more than twice as long as the 10 quarters it took after the recession of the early 1980s, the next-longest recovery since World War II.”
Finally let’s look at unemployment. Surely the Depression was horribly and exponentially worse than our current very unacceptable predicament.
Not so fast.
Estimates of the unemployment rate during the 1930s vary. A 1973 paper by Robert Coen shows that it was between roughly 14 percent and 22 percent from 1933 to 1940. EyewitnessToHistory.com claims that “in 1933, the unemployment rate hovered close to twenty-five percent … (and) never fell below 14.3% until 1941.” The Concise Encyclopedia of Economics tells us that the lowest unemployment rate seen during the 1930s was 12 percent.
The most directly comparable current unemployment statistic today — with one very big exception — is probably the “U-5″ figure, which includes “total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force,” but excludes those who are working part-time for economic reasons (i.e., they can’t find full-time work). The U-5 figure reached a high of 11.4 percent in October 2009 and has since fallen to 8.7 percent.
But BLS’s current methodology excludes from the workforce anyone who has stopped looking for a job. With labor force participation at a 35-year low, that’s a huge omission when comparing today’s data to other eras when there was little alternative to continuing to look for a job — at least if eating was on your and your family’s agenda.
Most analyses attempting to adjust for a “normal” level of labor force participation are currently adding between three and four percentage points to the “official” U-3 unemployment rate. Those points should arguably be added to the current U-5 rate for true Depression-era comparability. Doing so would take the U-5 rate to between 11.7 percent and 12.7 percent, figures which are about as close to the unemployment rates seen during much of the 1930s as they are to the official U-5 rates beginning when BLS first began tracking them in 1994 until 2008, i.e., until Barack Obama came along.
Thus, the current post-recession economy’s performance as measured in GDP, per capita GDP, and even unemployment has been far closer to what was seen during the 1930s than anything experienced following any post-World War II downturn. Another couple of years of this kind of continued misery, made even more possible by Obamacare’s impending havoc, may lead even progressive historians to start calling the Obama era the 21st century’s depression.