Bill McBride at Calculated Risk has created a series of iconic charts depicting unemployment rates in all US recessions since WWII. They are brilliant captures of just how unprecedented (post-war), devastating, and intractable the Great Recession is. Meteor Blades posts them regularly here.
Looking at these charts I started to wonder whether this recession is an anomaly or the shape of things to come. There aren't really any definitive answers to that, but one of the many very interesting things the CR unemployment chart hints at is the changing shape/nature of US post-WWII employment recessions. Was this current recession an exaggerated case in the normal progression of that evolution or an anomaly?
I was having a hard time visualizing the evolving shape over time so I recast the CR chart data into a time-sequenced series of recession employment loss "curves." The resulting chart shows pretty clearly that employment recessions have become increasingly more protracted and deep since (and including) the 1980 recession.
It was interesting to see these trends laid out in graph form.
This recast may be more visually revelatory than insightful to people that have been paying attention to the economic news, and I'm not particularly knowledgeable on economic matters. As a result, this will be a short diary.
First the Calculated Risk chart:
Calculated Risk Jan 2011 Unemployment Chart Gallery
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I took this data and double checked the start-stop calendar dates with Wikipedia here and the yearly peak rates below:
Interpolating the Calculated Risk chart data and recasting it into sequenced, four-year segments based on the Wikipedia entries results in this:
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This chart shows that employment recessions fundamentally changed in the 1980 recession. Since that time they have been progressively getting longer and deeper and with shallower recoveries.
There can be (and are) many explanations, or combination of explanations, for this. Outsourcing, tax policy, low-risk globalized investment opportunities, oil shocks, 18% Fed fund rates, etc., are all factors. What is clear, to me anyway, is that this is, and has been a known trend in our fundamental economic condition. Yet our politics and policy lags behind the effects of this devastating trend, both in terms of worker protection/safety-net and incentivizing actual value-creating economic behavior.
Whatever the cause-effect cycle there's no bounce back to our economy compared to the pre-1980 economy. That condition is getting worse. Politicians can look forward and know it will continue to get worse. They look forward and see that a revamped unemployment system is called for that takes into account that people will be out of work for years as a natural product of the modern economy. Yet do nothing. Yet we focus on Social Security.
Yet, well, you get the drift... Policy and priorities just aren't keeping up.
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Note: I added the curve-fit equations if anyone wants to integrate them. My calc is rusty (heh!) but there may be some figure-of-merit insight in the comparison between the peak depth of deep-V recessions and the total impact of the current form.