Chart of the Day - Length of Recessions

The current offering from http://www.chartofthed... is useful to give some perspective to where we are in light of a century of history.

This recession (thus far) has lasted only slightly longer than the recessions of 1973-74 and 1981-82. However, in spite of the optimism of some, the current recession is probably not ending in the second quarter. So it is likely to add at least a couple of more months. That would mean that, skipping over the 43 month recession that started the Great Depression, we will have to go back to 1913 to find a recession that lasted longer. This recession would have to last past the end of 2009 to surpass the three Great Recessions of the early 1900's.

The depth of this recession is another story. Over the last 60 years the GDP declines during many recessions have been quite moderate compared to what we see in this recession. Only the twin recessions of the early 1980s and the recession of 1973-74 are in the same league with the plunge we have seen in GDP in the current recession.

The graph below, courtesy of the St. Louis Fed FRED data base, shows the real GDP for the past 60 years through fourth quarter 2008. An overlay has been applied to show where the graph will go with first quarter 2009 data, using the preliminary GDP data for Q1/2009.

If the preliminary first quarter real GDP decline of 5.7% (annualized) is the final number, and if the current quarter has no decline in GDP, this will be the most severe recession since the Great Depression. The current recession will have severity of 150% or more compared to the other "big ones" since World War II, except for the recession of 1957-58. The comparison would have the current recession about 115% of the GDP drop of 1957-58.

I was in the job market in the second quarter of 1958, with a new masters degree in chemistry and a Phi Beta Kappa key. I mailed over 40 letters with resumes. I received five replies, was offered three interviews and received two job offers. Both job offers came, I believe, because of personal relationships. Without family and personal friends, I might not have had any offers. Based on my experience, this is a terrible time for new grads to enter the job market. That being said, one grandson, two years after college with no professional jobs to date, just got a corporate job in his field (accounting). Is that a green shoot?

This analysis and conclusion is probably not a surprise to many Seeking Alpha readers. Many may believe, as I do, that the recession will not end in the second quarter and the GDP graph will extend below the -3.1% GDP decline projected by the graph overlay.

Comments

[kruser53:]

Interesting summary. This gives some perspective to what we are going through. I didn't really learn anything new, but the numbers and graphics certainly made my mental images crisper.

Jun 12 03:38 PM

[Swashbuckler:]

Appreciate the post. Historical context is always useful when the economy is in the dump and the outlook is uncertain.

Jun 12 06:38 PM

[W.E. Heasley:]

The charts give good images. What the carts do not say is the form of the recoveries that occurred at the end of the series of recessions depicted.

Is there a sister chart showing "V", "W", "U", and "elongated
U" recovery shapes associated with the end of each recession depicted?

Jun 13 08:38 AM

[markincorsi...:]

W.E. Heasley 2
Is there a sister chart showing "V", "W", "U", and "elongated
U" recovery shapes associated with the end of each recession depicted
Jun 13 08:38 AM
and don't forget the "L__________" shape.

Jun 13 09:21 AM

[standfast:]

The Soviet Union never believed it could ever go bankrupt, either.

Jun 13 12:06 PM

[John Lounsbury:]

Commenters - - -

Thanks for the input. I'll have to take a look at recovery shapes for various past recessions and compare economic conditions for each and now. No promises on how soon I'll get that done, though. Maybe someone else will publish something good in that regard before I get to it.

Jun 13 12:56 PM

[Tom Armistead:]

This recession is going to have a length and severity similar to those that prevailed before the advent of the SEC and modern regulation. Monetary and fiscal policy have been powerless to restrain it.

What would have restrained it would have been prudential regulation, the exact thing from which the CDS market was exempted by law, and from which the other markets were exempted by the Bush administration's careful disembowelment of the SEC.

Jun 13 04:51 PM

[Steven Hansen:]

the tangled webs we weave. i can remember comments being made by prominent economists 9 months ago how we were not going to have a recession. now we are illustrating how this recession is the worst since the Great Depression.

Jun 13 06:19 PM

[dragonpaw:]

We now have a national debt that is projected in the range of $20-50 trillion (unfunded and under-funded debt [TARPS, soc.sec, medicare,medicaid, pension funds, etc, ad nauseum] that borders in the incomprehensible. Other countries(Chinaesp.) notice.
For simplicity,assumeow and near future (five year) debt of $30 trillion. (I know this is beyond the rosey predictions of the powers-that-be). This amounts to $100,000.00 per capita. What this amounts to is an additional $400,000.00 debt/wage-earner. At 5% payback/ year in T-bills( again historicaly low), this means a wage-earner debt of ~$20,000.00 per year.
Ad this to your mortgage payment! Welcome to the "indentured servitude" of the twenty-first century! Our children and grand - children will revile us for ou stupidity and 'audacity'.

Jun 13 10:34 PM

[standfast:]

Debt is an ingenious substitute for the chain and whip of the Bankster slave drivers.

As the economy gets better everything else gets worse.

BTW the green shoots are weeds, call a spade a spade

Jun 14 12:07 AM