2010 Isn't 1981 (or 1991, or 2001)

In the 40 years between the end of World War II and the Cold War, the United States suffered  eight recessions. Their job losses all followed the same pattern, more or less. Employment hit bottom and rebounded at practically the same rate, like a sharp bounce pass, or a half pipe. When you map these recessions on top of each other, they look like concentric Us and Vs.

Then in 1990, and again in 2001, something happened. Or didn't happen. The ball didn't bounce. Jobs were lost and they stayed lost for months after the recession turned to recovery. Map these recessions, and they look like a long, shallow crater.

august unemployment graph.png

The last two recessions healed slowly in the job market. But the last two recoveries also weren't that devastating. Today we seem to have the worst of both worlds. A deep recovery with a long floor.

Over the weekend, the White House argued that today, "the rate of job growth is actually faster now than was the case at comparable points of the past two recoveries." White House economist Alan Krueger brandished this graph:

Private Payroll Employment During Recoveries

Krueger's trying to score a point for the administration (it is the White House blog, after all). But the lesson here isn't, Hey, look how much better we're doing than 2001! The lesson is how much worse we're doing than 1983.

Not that it's entirely, or even marginally, the fault of the White House. We don't have the adrenaline shots we had 30 years ago. The Federal Reserve doesn't have sky-scraping interest rates it can slash to jump-start the economy, and the federal government doesn't have room to cut taxes by trillions of dollars on top of our historic deficits. In fact, there is no "right comparison" between recoveries. Since World War II, we've never been so far down in the valley, and so far from seeing the other side.