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This Depressing Economy

It's far closer to the dreadful 1930s than you might think.

Tom Blumer


September 13, 2013 - 12:31 am

The government’s August jobs report from its Bureau of Labor Statistics was all too typically lackluster.

It is true that 164,000 seasonally adjusted payroll jobs were added during the month, per the Establishment Survey of employers, but June and July were revised down by a combined 75,000. The Household Survey used to determine the unemployment rate had even grimmer news, as it showed that 115,000 fewer Americans were working in August than in July. The only reason that the official (“U-3″) unemployment rate fell to 7.3 percent is because the civilian workforce shrunk by over 300,000, taking the labor force participation down to 63.2 percent, that figure’s lowest level in since 1978.

Looking back further, since President Obama was first inaugurated in January 2009, seasonally adjusted employment per the Household Survey has increased by just over 2 million, while the number of adults not in the labor force has skyrocketed by almost 10 million.

On Wednesday, the Obama administration indicated that it wants to take the focus off of Syria and for the umpteenth time shift the president’s energies back to the economy. Haven’t you guys done enough damage already?

It may be hard to get used to the idea, but the onslaught of statistics such as these in the areas of employment and output indicates that we’re in an economy which, in certain statistical respects, more resembles what the nation experienced during the 1930s than during the other far more legitimate recoveries seen since World War II.

To be clear, I’m not suggesting that the level of human suffering currently occurring — though it has been virtually ignored and vastly understated by an establishment press which has seemingly excised the terms “homelessness” and “tent cities” from its dictionaries while losing its directions to the low-priced weekly motels where so many downtrodden families now live — is anywhere near what it was during the Great Depression.

That said, data at the federal government’s Bureau of Economic Analysis shows that the economy under President Franklin Delano Roosevelt took barely longer to recover from the steep 26 percent nosedive in real gross domestic product (GDP) which took place from 1929 to 1933 than the economy under Barack Obama has since the most recent recession’s 4.3 percent real GDP decline officially ended in the second quarter of 2009. It may be that the only thing keeping the Obama “recovery” from looking worse on the GDP front is that quarterly stats didn’t become available until shortly after World War II.

The economy under Roosevelt recovered what had been lost in 1936, three years after the Depression’s trough, and grew at a compound annual rate of almost 11 percent to get there. That pace of growth, accompanied by the decade’s high unemployment, explains the popular saying about that period, namely that “the Great Depression wasn’t so bad, if you had a job.”

Given that FDR didn’t take office until March 4, 1933 — the Constitution’s 20th Amendment, passed earlier that year, established our current January 20th Inauguration Day, beginning in 1937 — it’s reasonable to believe that the Depression’s bottom occurred in the third or fourth quarter of that year. This would mean that full recovery, if real GDP had been computed on a quarterly basis, may have been achieved just nine or ten quarters later, though it’s conceivable that it could have taken as long as 15 quarters.

The economy under Obama didn’t see real GDP return to its pre-recession peak until the second quarter of 2011, the eighth quarter after the recession’s end, and did so with paltry compound annual growth of only 2.3 percent; it was nine quarters before BEA issued multi-year revisions in July. In every other recovery from a downturn since World War II, real GDP returned to it pre-recession peak in one, two, or three quarters.

Now let’s compare FDR and BHO using “Buffett’s Benchmark,” so named because it’s the standard by which Warren Buffett, the Obama-worshipper of Omaha, defines a recession’s end. In his view, that doesn’t occur “until real per capita GDP gets back to where it was before,” i.e., its previous peak.

The 1930s economy got to within 0.3 percent of reaching Buffett’s benchmark in 1937, four years after the bottom, before falling back in 1938 and finally getting over the hurdle in 1939. The latest GDP report for the second quarter of 2013, the sixteenth quarter after the most recent recession’s end, revised an original estimate of 1.7 percent annualized growth up to 2.5 percent, and finally pushed per capita GDP above its fourth quarter 2007 peak. It will stay that way as long as the final second-quarter revision in late September comes in at an annualized 2.0 percent or higher and growth continues in subsequent quarters — neither of which is a certainty.

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. 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.

Along with having a decades-long career in accounting, finance, training and development, Tom Blumer has written for several national online publications primarily on business, economics, politics and media bias. He has had his own blog,, since 2005, and has been a PJM contributor since 2008.

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Top Rated Comments   
To me watching here in Canada there is no question that this destruction of the American economy can only be on purpose.
No administration could be this incompetent without knowing it.
It's an agenda.
1 year ago
1 year ago Link To Comment
People remember pictures of the breadlines from the 1930s. Masses of men, stretching five abreast down the street and around the block, waiting for food.

Well, if the 47 Million Americans on SNAP had to line up to get their food, the line could start in Times Square in New York City, and snake across the entire country, six abreast, all the way to Venice Beach in Los Angeles.

We just do a better job of hiding it, these days.
1 year ago
1 year ago Link To Comment
"we’re in an economy which, in certain statistical respects, more resembles what the nation experienced during the 1930s"


"We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong … somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. … I say after eight years of this Administration we have just as much unemployment as when we started. … And an enormous debt to boot."

-- Henry Morgenthau, Jr., Treasury Secretary, FDR Administration
1 year ago
1 year ago Link To Comment
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All Comments   (45)
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what Jonathan said I didnt know that anyone able to profit $8638 in a few weeks on the internet. find more
Go to website and click Home tab for more details.
51 weeks ago
51 weeks ago Link To Comment
Maybe Obama can ask Putin for economic advice.
52 weeks ago
52 weeks ago Link To Comment
The problem we as a nation face is a Chicken or the Egg thing. The Democrat Party buys the Peoples' votes with their own money, as Americans love Free Stuff and being called Victims.

The over-arching mantra of the Democrat Party is two things: Celebration of Victimhood and Redistribution of Wealth aka Socialism aka Social Justice aka Fairness. You must understand that Fairness is the opposite of Freedom; Fairness is Equality of Outcome and not Equality of Opportunity.

So the question becomes: Is America a failed nation because it is governed by the Democrat Party which loots the Production Class to buy the votes of the Dependent Class and by doing so destroys job production a la "Atlas Shrugged?" Or is America a failed nation because its people are a failed people who will vote for Democrats for Free Stuff and to be pandered to as a member of one or more of the Democrat Party Victim Groups? After all, all the Democrat Party is is a hodgepodge Balkanized collection of Victim Groups, braying to one another "Our Victim Group is better than your Victim Group."

We must face up to the fact that The American People are venal and a Failed People that ran out and voted to re-elect Obama while there were 9.5 million fewer jobs as measured from the last day GW Bush was in office; down graded from AAA to AA for the first time in history; doubling of gasoline prices; IRS owned by the Democrat Party but covered up by CBS, NBC, ABC, and all the rest of The Democrat Media; Bengazhi covered up by The Democrat Media.....

The simple fact is that unlike those people of the 1930s who were not parasites and victims, the American People just no longer have The Right Stuff that previous Americans had. The Racial Problem that this nation has is simply not solvable, as Detroit and all of our major cities are now cesspools of Liberalism that have been run by Democrats for decades and destroyed by Democrats, yet all the people of those cities ran out and voted for Obama, twice. Not fixable.

Blacks are only the second-most racist groups in America, topped by White Liberals who wallow in self-righteousness as they scream RACISM at every thing that moves, not caring in the least that it is phony racism created by The Democrat Media for their consumption, and to pander to blacks to get their votes (also bought votes with handouts looted from The Production Class). So we get Duke Lacrosse after Duke Lacrosse, like Travon Martin aka Duke Lacrosse 2013. Blacks are worse off than ever under Obama, yet just about every black ran out and voted for Obama. This is racism and it is simply not fixable. It is a Terminal Disease.

The problem is The American People. Somewhere along the line Self Reliance was replaced by Entitlement and Self - Admiration and Celebration of Victimhood. There is a war being perpetrated by Democrats on White Males Who Are Not Gay. You can replace a Failed Government, but you cannot replace a Failed American People.
1 year ago
1 year ago Link To Comment
No job, no vote. Unfortunately, unavoidably, the country must go through
purgatory to reach heaven-on-earth.
1 year ago
1 year ago Link To Comment
Obama and his stupid red line has resulted in him and his ship of fools turning our foreign policy over to Putin and Russia. Now if we could find someone with some real world working experience to take our Domestic policy we might survive 3 more years of the Ghetto organizer and his ship of fools!
1 year ago
1 year ago Link To Comment
The numbers are much different if one adds back the several categories of persons the obamateers deducted from the number of unemployed; perhaps doubling the unemployment rate to about 15 %. In 1939 we were still sometimes enjoying nothing more than a glass of warm water for supper When preparations began in the Roosevelt dictatorship for WWII and jobs in defense plants appeared, things began to turn around. The starting pay for many was sixty cents per hour, with producers of military goods paid on a cost plus basis. The more it cost them to produce their products, the greater the return on their investments. The New Deal was the beginning of our national insolvency. Obama will put on the finishing touches and bankrupt us before leaving office, which he may not choose to do voluntarily. What shall we do then?
1 year ago
1 year ago Link To Comment
You have to be putting me on with that Hillary ad?
Put one up showing the BLOOD on her hands and I'll sign that one.
1 year ago
1 year ago Link To Comment
I was very interested in reading your article, but the VERY annoying auto-run video sent me back to Instapundit.
1 year ago
1 year ago Link To Comment
Use AdBlocker Plus or something similar. No ads, no auto-run anything. Technology is your friend. ;)
1 year ago
1 year ago Link To Comment
The bigger the government, the smaller the citizen.
1 year ago
1 year ago Link To Comment
Some of us started discussing this when we saw the policies being advanced by Pres'ent Obama in his first year in office while the Democrats had control of both House and Senate ... and our prediction has just kept being confirmed ...

In the 30s, it was a Republican *Progressive* President who raised taxes and government spending, until he was replace by a Democrat Progressive President in 1933 ... this time round, a Democrat Progressive Pres'ent has been replaced by the same Democrat Progressive Pres'ent ...

We will emerge from this current Obama/Reid/Pelosi Depression when our electorate elects a government who will increase domestic production of energy resources as well as will increase domestic production of energy ... (meaning, most likely, more nuclear plants (possibly thorium rather than uranium/plutonium type) and more extraction and use of domestic fossil fuels) ...

In addition, that government has to encourage (mostly by stopping getting in the way of) production of goods which can be sold ...

The natural increase in commerce that those two things causes will increase government revenues (as taxes) even as it increases the revenues (as income) of those of us who work to produce goods and services ...

Oh - and a return to where *everyone* (including our politicians) is subject to the same laws in the same way will help ... no Obamacare "waivers" for the favoured few ... no IRS singling out of various interest groups ...
1 year ago
1 year ago Link To Comment
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