Tuesday, January 20, 2009

How bad is it?

It seems like every day we hear about how bad things are now.

"The worst economy since the Great Depression"
is something I heard just the other day. I wondered about this though. It seems like things are not great, but are they really "that" bad. I remember the 70's (I was pretty young, honest, but I do remember some of it), and I recall there being some pretty bad years. So I decided to do some research. I wanted to find out if this is really the worst economy since the Great Depression, or if just maybe, the media and politicians are hyping it a little.

The first measure of the economy I decided to look at was unemployment. The unemployment number for December 1008 (last reported) was 7.2%. That seems pretty bad, considering I remember us having numbers in the 4 and 5 % range. I looked at Data between 1970 and 2008. The 5 best years (lowest unemployment) are shown in the table below:


Average Annual Unemployment Rate











The worst 5 years (highest unemployment rates) are shown in the table below:


Average annual unemployment rate











As I mentioned before, the unemployment rate in December of 2008 was 7.2%. Not quite in the top 5 for worst of the last 39 years, but in all fairness, significantly worse than the best 5 years. So it is definitely not the worst economy since the Great Depression, at least not from an unemployment standpoint. The average over the last 39 years was 6.14% and the median was 5.8%. (Source of numbers: US Bureau of Labor Statistics http://www.bls.gov/cps/)

The United States has traditionally had pretty low unemployment numbers when compared to many other countries. In Europe. For example, in the year 2000 when the US was at a 4.0% unemployment rate, the European Union was at 8.5%. In that year France was at 9.0% and Spain was at 11.1%. That makes 7.2% look pretty darn good. In fact the lowest unemployment rates in Spain or France since 1997 was 8.3% which both countries recorded in 2007. For the EU as a whole, 2007 was also the best year since 1997 with a rate of 7.1% (Source of European Numbers: European Commission Eurostat pages http://epp.eurostat.ec.europa.eu)

During the Great Depression unemployment hit 25% in the United States. What we are going through now is obviously not in the same ball park. Hey, we can still afford to spend 170 million on a presidential inauguration.

By presenting this data I am not trying to say things are great. They are not. I am just trying to point out the facts that it is not quite as bad as everyone makes it out to be. So we should not panic. This too shall pass. As long as we don’t rack up trillions in government debt and socialize everything. Oh wait. Maybe we should panic. :)

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