NR Market Watch

Cheryl Russel’s work is always some of the most insightful I read. After you read through this you will want to sign up for her newsletter. and buy her books.

demographics@newstrategist.com

Score One for the Great Recession

How do you measure bad times? Specifically, how does the Great Recession compare with the Great Depression? Economists typically use GDP as the measuring stick. During the Great Depression, GDP fell by a stunning 27 percent. During the Great Recession, GDP fell only 4 percent. Using the GDP measure, then, the Great Recession was only 15 percent as severe as the Great Depression (4/27 x 100 = 15).

Something is missing from the GDP comparison, however: a human face. GDP and other macro-level economic statistics fail to capture the human experience of hard times. We need something that measures the personal dimension of economic downturns. One way to measure the personal is with the yardstick of demographic change. We can use demographic statistics–unemployment, homeownership, living arrangements, births, marriages, migration, and even death–to compare the Great Recession with the Great Depression. And we will keep score.

Unemployment

When comparing the Great Recession with the Great Depression, the unemployment rate is the Holy Grail. Unfortunately, it is not possible to directly compare the unemployment rates of the two time periods. Today, the federal government surveys an enormous sample of the population every month to determine unemployment. Not so during the Great Depression. Historians have made educated guesses about unemployment during the 1930s by subtracting estimates of the employed from estimates of the civilian labor force. The remainder is the unemployed. According to these calculations, unemployment during the Great Depression peaked at 25.2 percent in 1933.

The official unemployment rate during the Great Recession peaked at a much lower 10.1 percent in October 2009. Some say this figure does not tell the whole story because it counts as unemployed only those who have been looking for work recently. Even using the most expansive definition of unemployment, however, the rate (more…)

Oregon’s construction industry is at its lowest employment level since 1995. Manufacturing employment has plummeted to historical lows. Retail trade dropped to recessionary lows after some improvement in June.

Oregon unemployment benefits paid in 2009, at $2.8 billion, would have made it the third largest payroll of any industry in the state, if it were an industry. That is larger than Oregon state government employment,including the university system,  at $2.6 billion.

These facts and more are graphically illustrated in this recent report from QualityInfo.org compiled by Worksource Oregon.

The department predicts that manufacturing employment will continue to fall over the next 10 years.

The upside for people who are out of a job, and we’re reaching here, is that as increasing numbers of people retire there will still be job openings.

Who Is Spending Less?

No one is spending less–at least not compared with their spending 10 years ago. Although the Great Recession has pummeled home values and decimated net worth, it has yet to greatly affect household spending. We are in the midst of the worst economic downturn since the 1930s, but the average household spent 8 percent more in 2008 ($50,486) than in 1998 ($46,937, in 2008 dollars) when the economy was booming.

Over the decade, spending has climbed in every age group, with the increase ranging from a low of 2 percent among householders aged 45 to 54 to a high of 14 percent among householders aged 75 or older, after adjusting for inflation. You might have heard differently. A recent Wall Street Journal article warned that householders aged 65 to 74 had cut their spending over the past decade, but in fact householders in the age group boosted their spending by 13 percent between 1998 and 2008. To find the cut, you have to compare the spending of householders aged 55 to 64 in 1998 with that of householders aged 65 to 74 in 2008. Well, duh. Of course households reduce their spending as they retire. This is the lifestage pattern of spending–which, by the way, should be taken into account in retirement planning (but rarely is).

Before you get too hopeful about consumer spending, note that average household spending fell 2 percent between 2006 (when it reached the all-time high of $51,688) and 2008 ($50,486), after adjusting for inflation. Average household spending fell in all but one age group during those two years. The exception: householders aged 55 to 64 boosted their spending by 1 percent because more were in the labor force. In every other age group spending was down, with the biggest declines–of 4 and 5 percent–registered by householders aged 25 to 44. When 2009 spending statistics are released later this year, they may begin to show the stomach-churning drops that are being picked up by other measures of the economy.

By Cheryl Russell, editorial director, New Strategist Publications. If you have any questions or comments about the above Q & A, e-mail New Strategist at demographics@newstrategist.com.