The Great Recession vs.

The Great DepressionDr. Norman Cloutier, Director

UW-Parkside Center for Economic Education

Wisconsin Council for the Social StudiesMadison, Wisconsin

3/15/10

Peak UnemploymentGreat Recession

• October 2009 unemployment= 10.1%

• Feb 2010= 9.7%

Great Depression• 1933 unemployment =

25%• Non-farm

unemployment may have been more than 35%

Economic GrowthGreat Recession

• 2008 Q2 to 2009 Q2, real GDP growth= -3.83%

• 2009 Q4 annual rate= +5.9%

Great Depression• 1929-33 real GDP

growth= -30%

InflationGreat Recession

• July 2009 12-month= -1.97%

• Jan 2010 12-month= +2.65

Great Depression• 1929-33 inflation=

-24.4%

DurationGreat Recession

• Began December 2007• NBER called recession

in December 2008• Has it ended? • Two consecutive

quarters of positive growth: 2009 Q3= 2.2 2009 Q4= 5.9

Great Depression• Generally accepted

1929-39• Actually two

recessions: 1929-33 and 1937-38

BankingGreat Recession

• 2008 to Feb 5, 2010 bank failures= 191

• $385.6 billion in deposits

• … or 2.7% of GDP

Great Depression• 1930-1933 bank

failures= 9,106• $6.9 billion in deposits• … or, 7.2% of GDP

“What we are witnessing is essentially the breakdown of our modern day banking system.”

--Bill Gross, manager of the world’s largest bond mutual fund, PIMCO

Why were (are) economists so concerned about this recession?

• Fear and panic in the commercial paper market.

• On September 16, 2008 the Reserve Primary Fund money market mutual fund “broke the buck.”

• Risk aversion and the flight to quality.

• As businesses contracted, job loss increased at an alarming rate.

Job Loss as Percentage of Job Loss as Percentage of Employment PeakEmployment Peak

8.4 million jobs lost

Lost >500,000 jobs per month, Oct 2008 thru Apr 2009

How long did it take to return to peak employment How long did it take to return to peak employment after the end of the recession was called? after the end of the recession was called?

1981: 12 months

1990: 23 months

2001: 39 months

Alternative Unemployment Rate: Unemployed, marginally attached, plus part-time for economic reasons

Feb 201016.8%