|The Great Recession May Not Be The Worst Since The Great Depression, But It Sure Feels Like It And There Are Plenty Of Reasons Why|
|Monday, August 13, 2012 11:25|
Is this really the worst recession since the Great Depression? A blog written by Catherine Rampell says no, but it certainly feels like it. If there’s comfort in knowing that, on almost any indicator followed, this recovery is not the worst, there’s plenty of other data that show it’s certainly not typical.
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The chart below from two US Bureaus—of Economic Analysis and of Labor Statistics—compares this recovery indicator by indicator to average post-war recovery. Since the word recovery can only be used to describe recessions that have already bottomed, the measure of this recovery is shown from June 2009.
What is true is that this recession is one of the most severe of all post-war recessions. That’s also why it still feels so bad, because it indeed was bad and the recovery has been painstakingly slow.
From many perspectives, the Great Recession was the deepest and its recovery the longest since the Great Depression. It’s been 38 months since the recession’s trough.
We’re currently about five million jobs short from the level of employment in 2007 before the crisis hit. And in housing, the average rebound in prices has been 24%; so far, home prices in this recession have only rebounded eight percent.
Payrolls usually grow 15 percent from trough to peak in a recovery; this time, payrolls have only grown two percent.
There are two bright spots and one of them is open to interpretation. First, government spending is the one metric that has shown smaller growth in this recovery than in any other. The public sector has not only not grown for three years, it has shrunk to levels smaller than before the crisis hit.
The other bright spot is corporate profits. They have expanded at a greater pace during this recovery than in any other recovery in the past 60 years. Average corporate profit growth in other recoveries was 38%; in this one, they’re already up 45%.
Interestingly, the recovery in both consumer spending and in gross domestic product pretty much match the historic average. It’s not uncommon to have a quick recovery after a deep recession and it’s not unusual to have a slow recovery after a shallow recession.
What is unusual is what we have today—one of the deepest recessions in history followed by one of the slowest recoveries in history. So, even if this is not technically the worst recovery since the Great Depression, that’s a big reason why it feels so absolutely awful.