The Income Drop and America's Lost Decade

Private sector job growth in the last ten years is now negative for the first time since the Great Depression, Michael Mandel reports on his BusinessWeek blog. It's just not the jobs that are disappearing. It's the salaries that are flat-lining. Income for the median American household fell for the first time in four decades according to the new Census report. And the bottom for income and joblessness isn't even here yet.

Certainly one of the most important factors pushing down income is unemployment. And job creation in the last 10 years has been more than disappointing -- it's been historically terrible. Here's the chart from Mandel:

He anticipates an argument I've heard against the Lost Decade theory, which is: Well this graph is unfair, because it's comparing a bottom (August 2009) to a peak (1999). So Mandel cleverly offers this graph as well (below), which looks at how private employment has grown between troughs. In other words, how did private employment grow between 1991's mild recession and November 2001? It grew by more than 20 percent.

The only two bars on the graph in negative territory are the recession ending in Nov 1982 and the recession as of August 2009. Does that mean our recession isn't any worse than 1982? Not exactly. The 1982 negative bar is slightly misleading since it's measuring job growth between July 1980 and November 1982, which is (1) A much shorter amount of time to create jobs and (2) Measuring the effect of two back-to-back recessions that compounded each other.