Wednesday, September 21, 2011

Great Recession vs Great Depression: An Update

This is an update of the comparison between the Great Recession and the Great Depression posted by Demo Memo in February 2011. In that analysis, I compared the two downturns using six demographic measures. At that time, the results showed the Great Recession to be only 35 percent as severe as the Great Depression. How have those numbers changed in the past seven months?

GDP (update) Let's begin by updating the initial GDP comparison. Back in February, the government had estimated an overall GDP decline of 4 percent during the Great Recession. That number has now been revised downward to 5 percent, but it is still well below the 27 percent GDP decline during the Great Depression. Score: (5/27) x 100 = 19. Using this traditional measure, the Great Recession was 19 percent as severe as the Great Depression. (Back in February, this calculation showed it to be only 15 percent as bad.)

Unemployment (no update) The unemployment score has not changed because the Great Recession's unemployment peak of 10.1 percent in October 2009 still stands, as does the more expansive definition of unemployment (U-6) which peaked at 18.0 percent in January 2010. I averaged these scores against the Great Depression's unemployment rate of 25.2 percent (10.2/25.2 = 40; 18.0/25.2 = 71; (40+71)/2 = 56). Score = 56.

Homeownership (update) Estimates of homeownership have continued to fall since February, and the 2010 census found an even lower rate than had been estimated. The new numbers suggest that the homeownership rate may have fallen from a peak of 69.0 percent in 2004 to the 65.1 percent found by the 2010 census--a 3.9 percentage point decline. This compares with a 4.2 percentage point decline during the Great Recession. Score: (3.9/4.2) x 100 = 93.

Immigration (update) Since February, there has been an annual update of the number of immigrants coming to the United States, and the new number is somewhat lower. In 2010, 1,042,625 legal immigrants came to the United States, 17.7 percent fewer than during the peak year of 2006. During the Great Depression, legal immigration fell by a much larger 91.8 percent. Score: (17.7/91.8) x 100 = 19.

Births (update) Since February, there has been an annual update of the number of births in the United States. The number has fallen from a peak of 4,316,233 in 2007 to an estimated 4,007,000 in 2010--a 7.2 percent decline versus a 10.7 percent decline during the Great Depression. Score: (7.2/10.7) x 100 = 67.

Marriages (no update) No new data for this one. During the Great Depression, the number of marriages fell by 20.4 percent. During the Great Recession, the number has fallen by 5.8 percent. Score: (5.8/20.4) x 100 = 28.

Life expectancy (update) During the Great Depression, life expectancy at birth fell 4.8 years. New estimates show no decline in life expectancy, which reached a record high of 78.2 years in 2009. Score: (0/4.8) x 100 = 0.

Score Update Average the six scores and the result is 44. The Great Recession is 44 percent as bad as the Great Depression. This is up from 35 percent seven months ago. The increase in the score means that, in retrospect, the Great Recession is closing in on the Great Depression in its demographic impact. But it is still less than half as severe--although more than twice as bad as the traditional GDP comparison suggests.

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