How do you measure bad times? Specifically, how does the Great Recession compare with the Great Depression? Economists typically use GDP as the measuring stick. During the Great Depression, GDP fell by a stunning 27 percent. During the Great Recession, GDP fell only 4 percent. Using the GDP measure, then, the Great Recession was only 15 percent as severe as the Great Depression (4/27 x 100 = 15).
Something is missing from the GDP comparison, however: a human face. GDP and other macro-level economic statistics fail to capture the human experience of hard times. We need something that measures the personal dimension of economic downturns. One way to measure the personal is with the yardstick of demographic change. We can use demographic statistics--unemployment, homeownership, living arrangements, births, marriages, migration, and even death--to compare the Great Recession with the Great Depression. And we will keep score.
Unemployment
When comparing the Great Recession with the Great Depression, the unemployment rate is the Holy Grail. Unfortunately, it is not possible to directly compare the unemployment rates of the two time periods. Today, the federal government surveys an enormous sample of the population every month to determine unemployment. Not so during the Great Depression. Historians have made educated guesses about unemployment during the 1930s by subtracting estimates of the employed from estimates of the civilian labor force. The remainder is the unemployed. According to these calculations, unemployment during the Great Depression peaked at 25.2 percent in 1933.
The official unemployment rate during the Great Recession peaked at a much lower 10.1 percent in October 2009. Some say this figure does not tell the whole story because it counts as unemployed only those who have been looking for work recently. Even using the most expansive definition of unemployment, however, the rate peaked at 18.0 percent in January 2010 and now stands at 16.1 percent (See U-6 in table A-15 of the Employment Situation report).
We will keep score using this formula: Great Recession statistic/Great Depression statistic times 100. Using the official unemployment figure from the Great Recession, the formula is: (10.1/25.2) x 100 = 40. Using the larger Great Recession unemployment figure, the formula is (18.0/25.2) x 100 = 71. The average of 40 and 71 is 56. Score = 56.
Homeownership
During the Great Depression, the homeownership rate fell from 47.8 percent in 1930 to 43.6 percent in 1940--a 4.2 percentage point decline. So far during the Great Recession, the homeownership rate has fallen from the 69.0 percent peak in 2004 to 66.9 percent in 2010--a 2.1 percentage point decline. Score: (2.1/4.2) x 100 = 50.
Living arrangements
Despite the economic hardships of the Great Depression, household size continued its long-term historical decline, falling from 4.1 to 3.8 persons per household between 1930 and 1940 as people moved from farms to cities. During the Great Recession, average household size crept up slightly (and not at all after rounding), rising from 2.56 in 2007 to 2.59 in 2010. Because of ongoing urbanization during the 1930s, this indicator is not comparable between the two time periods.
Immigration
During the Great Depression, the number of people legally immigrating to the United States plummeted by 91.8 percent in just a few years, falling from 279,678 in 1929 to just 23,068 in 1933. So far during the Great Recession, the number of people legally immigrating to the United States fell from a decade high of 1,266,129 in 2006 to 1,130,818 in 2009--a 10.7 percent decline. Score: (10.7/91.8) x 100 = 12.
Births
During the Great Depression, the number of births fell from 2,582,000 in 1929 to a low of 2,307,000 in 1933--a 10.7 percent decline. So far during the Great Recession, the number of births has fallen from a peak of 4,316,233 in 2007 to an estimated 4,055,000 in 2010--a 6.4 percent decline. Score: (6.4/10.7) x 100 = 60.
Marriages
During the Great Depression, the number of marriages fell from 1,233,000 in 1929 to a low of 982,000 in 1932--a 20.4 percent decline. So far during the Great Recession, the number of marriages fell from 2,205,000 in 2007 to 2,077,000 in 2009--a 5.8 percent decline. Score: (5.8/20.4) x 100 = 28.
Life expectancy
During the Great Depression, life expectancy climbed to 63.3 years in 1933, then fell to 58.5 years by 1936--a decline of 4.8 years. So far during the Great Recession, life expectancy has fallen a miniscule 0.1 years--from 77.9 in 2007 to 77.8 in 2008 (the latest data available). Score: (0.1/4.8) x 100 = 2.
The Score
Average the six scores, and the result is 35. In other words, the Great Recession has been about one-third as severe as the Great Depression and more than twice as bad as the GDP comparison suggests.
Of course, the demographic impact of the Great Recession is still unfolding. Homeownership rates, births, marriages, immigration--even life expectancy--could decline further as households adjust to reduced circumstances. Any continuing declines will drive the score higher, but probably not by much. There is reason to believe we are through the worst of the Great Recession. As financial analyst and blogger Barry Ritholtz notes, most of the economy is people getting up in the morning and sending their kids off to school. As long as we are still doing that, we will muddle through.
No comments:
Post a Comment