Some thoughts on recessions
George Will has some thoughts on the history of recessions in the US, even as some Americans are up in arms over an unemployment rate of 4.9% — virtually full employment:
Today’s Americans, their pain threshold lowered by the successful modulation of business cycles, now regard recessions as not mere misfortunes but as violations of an entitlement to perpetual economic serenity. In the 50 years prior to 1945, contractions were frequent and ferocious enough to fray the social fabric. There were three contractions of 5 percent of GDP, two of 10 percent and two of 15 percent. Since postwar demobilization, the most severe contraction — that of 1982, when President Ronald Reagan and Fed Chairman Paul Volcker stifled inflation — was 1.9 percent.
That recession ended in November 1982. If another recession did start last month, then in the 302 months from November 1982 through December 2007, the economy was in recession only 14 months — 4.6 percent of the time. The economy was in recession 22.4 percent of the time between 1945 and 1982.
IBD quotes a reliable source that says the chance of the US having been in recession in January was 6%. Unemployment is the same as it was over two years ago. Things might get worse, but the caterwauling seems a bit overdone.
February 3rd, 2008 at 4:39 pm
I quote a reliable source (a person who sees internal daily store sales figures from a popular discounter) who says “It is clear to me that while our store dollar figures are doing OK, most of it is increased (discounted) food sales and decreased big ticket items”.
This is in one of the better local economies in the US where local wisdom is that we are buffered from much of the travails of economic downturns.
February 3rd, 2008 at 9:36 pm
Will’s closing paragraph:
If return is roughly proportional to risk–after all, that’s why people, especially the young, are encouraged to put retirement funds into equities rather than government bonds–perhaps growth is too.
I thought that middle- and working-class Americans accept a greater degree of economic turbulence than people in structured economies like Europe’s or Japan’s, and in return we enjoy greater long-term prosperity. That would seem a reasonable social contract for a nation of immigrants. (Nevertheless, the modern acceptable level of turbulence has been well short of economic darwinism.) If we’re not operating that way anymore, we should at least be open about the change and its consequences–who loses and who benefits, overall and in particular–over a decade and longer.