I made a pretty good case last year that the early 1980s recession was worse than the current downturn. But as of today I can no longer complain that my recession was longer.
The official word came this morning — this Great Recession lasted 18 months, from December 2007 to June 2009. The ’81-’82 recession and ’73-’75 recession held the prior record for post-WW II recessions at 16 months.
I’m still not ready to give up the idea that things were tougher in the early ’80s. Why?
Unemployment was worse. The U.S. unemployment rate topped 9 percent for 18 months. The unemployment rate topped 9 percent in May 2009 and needs to stay that high through November to match the bad old ’80s. It’s been holding at 9.6 percent in July and August.
Here’s a U.S. unemployment graphic from the St. Louis Fed. There’s no doubt unemployment is bad in this downturn, but we’ll see how it ends up looking compared to the bad old days that started in the late ’70s.
Mortgage rates. Inflation was brutal way back then and we all paid a price.
If you’re a potential homeowner in 2010, your interest rate for a 30-year fixed mortgage averaged 4.43 percent in August.
We’re not sure what that rate will average this month. But we’re pretty confident it will come in better than September 1981 — when you would have paid a rate of 18.16 percent on a mortgage.
Economic activity? Well, this one’s a little tougher. Here’s a chart of quarterly, seasonally adjusted changes in GDP, inflation adjusted, from the first quarter 1979 to second quarter 2010.
OK, that’s a pretty dramatic nose dive in the value of goods and services produced in this country during this recession. But look at those crazy drops in the early 1980s.
I’m going to hold out until December. That’s when we’ll know the November jobless data. If the unemployment rate is still tracking above 9 percent, it’ll be worse (or at least a tie for worst).
Take a look at the data from the 80s and now and share your insights. Which recession is worse?