Mark Thoma on Xia Yeliang and the Importance of Tenure
Indiana Republicans vs. the First Amendment

Great Recession or Great Depression?

Justin Fox:

One Difference Between a Great Recession and a Great Depression: Jobs: On Friday we learned that the U.S. added another 195,000 (seasonally adjusted) non-farm jobs in June. That was a bit better than expected, and another sign that the economic recovery may be, ever so tentatively, gaining speed. But it will take 12 more months like June just to get non-farm employment back to the level of November 2007… the fact that it's going to take close to seven years, if all goes well over the next year, just to get us back to that level is an indication of how bad the recession was and how weak the recovery has been. And getting back to the 2007 level isn't getting back to normal…. No other U.S. recession since World War II has been nearly this devastating…. In the National Bureau of Economic Research's Macrohistory Database, one can find a series of monthly non-farm employment numbers running from 1929 to 1939, compiled by the BLS. And guess what: they make for a much scarier jobs chart than the current recession….

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If you think this downturn was comparable in origin and inherent severity to the other recessions since World War II, then we've been the victims of economic-policy bungling of epic proportions. If, on the other hand, you think the proper comparison is the Great Depression, the last U.S. downturn brought on by a severe financial crisis, you'd have to say the White House, Congress, and most of all the Federal Reserve have done an absolutely brilliant job…. I'd lean toward explanation No. 2 — we did actually learn something from the Great Depression, although probably not enough.

An alternative way of looking at the elephant is that after 1929-1933 we had:

  • rapid employment growth over 1933-1937,
  • a second disaster in 1937-1938, and
  • 1939-1943--and then post-1945 stabilization at full employment.

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We still have to avoid the equivalent of 1937-38 and generate, somehow, the moral equivalent of war to get us the employment results of 1939-1943 before we can say that this is a smaller deal than the Great Depression in the U.S.

And, so far, I am not optimistic…