Some Data Suggest Economy Not Worst Since Great Depression…Not Yet


Year                        Unemployment rate
1923-1929              3.3
1930                         8.9
1931                         15.9
1932                         23.6
1933                         24.9
1934                         21.7
1935                         20.1
1936                         17.0
1937                         14.3
1938                         19.0
1939                         17.2
1940                         14.6
1941                          9.9
1942                         4.7

 

 

 

 

 

 

 

 

I recent months, we have constantly been told that this is the worst economy since the Great Depression.  The Dean of the University of Texas business school said so in March President Obama said so in September during his presidential campaign and continues to say so today.   If you look at a few key indicators, one may question that assessment. Professor Lee McPeters takes exception to the notion.

But, when one looks at the unemployment rate numbers from the years just after the 1929 crash, we find that they rise to an average rate of 8.9 in 1930 and top out at 24.9 in 1933. (as per the BLS) It stays above 20% through 1935 and then remains in the mid to upper teens until World War II.  Our most recent unemployment rate was pegged at 9.5% which is far less than the era of the Great Depression.  However, when one looks at more recent historical numbers, we find that the current unemployment rate reflects more accurately with the early 1980’s. In 1982, the avg rate for the year was 9.7% and in 1983, 9.6% of labor was unemployed.  For the 8 years of President Clinton’s administration, the unemployment rate was 5.2%.  During the GW Bush administration, the average unemployment rate was 5.3%,

Beginning Date           Ending Date           Dow Industrials          Loss
    ————–               ————-             ——————              —-
Sep.  3, 1929               Jul.  8, 1932             381.17  to   41.22     -89%
Mar. 10, 1937         Mar. 31, 1938             194.40  to   98.95     -49%
Nov. 12, 1938           Apr.  8, 1939             158.41   to  121.44     -23%
Sep. 12, 1939           Apr. 28, 1942             155.92   to   92.92     -40%
Jan. 11, 1973             Dec.  6, 1974          1051.70  to  577.60    -45%
Sep. 21, 1976           Feb. 28, 1978          1014.79  to  742.12     -27%
Apr. 27, 1981           Aug. 12, 1982         1024.05   to  776.92     -24%
Aug. 25, 1987           Oct. 19, 1987         2722.42   to 1738.74     -36%
Jul. 16, 1990              Oct. 11, 1990         2999.75   to 2365.10     -21%

If we take a brief look at the stock market crash of 1929, we find that the market’s initial jolt was a loss of 89% from late 1929 to mid 1932.  For the current environment to be on par with that time frame, if we consider a market high in 2007 of a 14164 Dow Jones, then the Dow would have to fall to 1558 to equal the malaise.  Midday on July 15, 2009 the Dow stood around 8500.

Dow Jones 1974-June 30 2009

Dow Jones 1974-June 30 2009

1929 Crash...Forecast or Simply History?

1929 Crash...Forecast or Simply History?

 The most recent bear market had a low of 6547 which means the drop from the 14164 high was about 54%.  Now, the Dow had a rebound after the 1929-1932 bear market ended and it rose to at least 194 by 1937, from which time the Dow took another 49% tumble.  The rebound is often referred to as a “false peak” because the apparent recovery in the economy as indicated by the Dow rising 373% from the 1932 low to the 1937 high.  Our current rise from the 6547 low is about 30%.  Earlier in the year, the rebound was more like 40%.  So, the question will be, is our current rise just another “false peak” or is there a real recovery. 

 

GDP percent change based on current dollars

GDP percent change based on chained 2000 dollars

     
     

1930

-12.0

-8.6

1931

-16.1

-6.4

1932

-23.2

-13.0

1933

-4.0

-1.3

1934

17.0

10.8

1935

11.1

8.9

1936

14.3

13.0

1937

9.7

5.1

1938

-6.2

-3.4

1939

7.0

8.1

1940

10.0

8.8

1941

25.0

17.1

1942

27.7

18.5

1943

22.7

16.4

1980

8.8

-0.2

1981

12.2

2.5

1982

4.0

-1.9

1983

8.7

4.5

2004

6.6

3.6

2005

6.3

2.9

2006

6.1

2.8

2007

4.8

2.0

2008

3.3

1.1

The 2008 GDP numbers are a bit misleading because the last two quarters showed contraction with a substantial 4th quarter contraction of the GDP over 6% with the first quarter of 2009 contracting by 5.5%, based on 2000 dollars.  The contraction of the economy as a percentage of GDP is definitely more pronounced than in the late 1970’s and early 1980’s if you only look at the last two quarters and compare it to the annual GDP.  But, you can’t do that. It’s comparing a full year to a couple of quarters.  For instance, the second quarter of 1980 saw a GDP fall of 7.8%, which is greater than any of the past 3 quarters.  It was bad timing for President Carter because he was trying to get re-elected.  Bad timing because the total change in GDP for that year was just 2 tens of one percent.  So, the story is still being written as to how well this recession compares to the early 1980’s.  But, the GDP change for the entire year of 1930 was negative 8.6% followed by -6.4% in 1931 and then a huge contraction of 13% in 1932.  We’ve had two quarters with a 6% and 5.5% decline. 

All of this points to a recession comparable to the late 1970’s and early 1980’s.  The comparison to the Great Depression is simply a tough argument to make, at this point.  I truly hope, as I think everyone does, that politicians will not be able to accurately say that we are in the worst condition since the Great Depression.  Many people have blamed the depression on Herbert Hoover.  Others blamed the deep recession of the late 70’s and early 80’s on Jimmy Carter.  Could this be the reason why the media and politicians choose Republican President Hoover’s legacy instead of Democrat President Jimmy Carter’s?  Or is it more because from a PR standpoint, the Great Depression is something that every one knows about.  Maybe its more attention getting or sexy to talk about the Great Depression instead of a simple recession.  But, regardless of the reasoning, many aspects of the current situation cannot credibly be compared with the depression and more accurate reporting by the media and proclamations by policians would be that it is the worst in 30 years.

 

SPC Convective Outlook Thu 8am to Fri 8am

SPC Convective Outlook Thu 8am to Fri 8am

Weather Bottom Line:

  Today we have a classic situation with a storm coming out of the plains, dragging up warm front.  Clouds and showers with a few t’storms are in the cards but all of the clouds and such should suppress any big storms.  But, the warm front will draw up warm, moist, unstable air behind it so that will set the stage for Thursday as the cold front approaches.  It’s a pretty strong cold front with highs behind it for Friday and the weekend in the upper 70’s and low 80’s.  I would think that we would have a reasonably good chance for t’storms and possibly strong storms on Wednesday afternoon or evening.

DAY 2 CONVECTIVE OUTLOOK 
   NWS STORM PREDICTION CENTER NORMAN OK
   1252 AM CDT WED JUL 15 2009
  
   VALID 161200Z – 171200Z
  
   …THERE IS A SLGT RISK OF SVR TSTMS FROM PORTIONS OF THE
   CENTRAL/SRN PLAINS EWD INTO THE TN/LOWER OH VALLEYS…AND THEN NEWD
   INTO NY/PA…
  
   …SYNOPSIS…
   UPPER TROUGH OVER THE WRN GREAT LAKES WILL DEEPEN SEWD THU FROM THE
   MID MS/TN VALLEYS EWD INTO THE CAROLINAS…AS THE UPPER RIDGE BUILDS
   NWD ACROSS THE INTERMOUNTAIN WEST. THE GRADIENT BETWEEN THESE
   SYSTEMS WILL RESULT IN STRONG FLOW ALOFT…40-55 KT AT 500 MB…WITH
   NWLY WINDS FROM THE NRN ROCKIES SEWD INTO KS/OK…AND WLY/SWLY WINDS
   FROM THE MID MS/TN VALLEYS NEWD THROUGH THE OH VALLEY AND INTO THE
   NORTHEASTERN STATES. COLD FRONT ASSOCIATED WITH THE UPPER TROUGH IS
   FORECAST BY LATE THU AFTERNOON TO EXTEND FROM NY SWWD TO NEAR THE
   AR/MO BORDER…AND THEN WWD TO THE CO/NM BORDER.
  
   …KS/OK/NEB SEWD INTO SRN MO/AR…
   CLUSTERS OF STORMS MAY BE ONGOING AT THE START OF THE PERIOD ACROSS
   THE OZARKS AND WRN CENTRAL PLAINS DUE TO LIFTING ASSOCIATED WITH
   SEPARATE LOW LEVEL JETS. WHILE THESE STORMS ARE EXPECTED TO BE
   ELEVATED…STEEP MID LEVEL LAPSE RATES MAY SUPPORT A HAIL
   THREAT…ESPECIALLY WITH THE CENTRAL PLAINS STORMS. HOWEVER…BOTH
   CLUSTERS OF STORMS ARE LIKELY TO INTENSIFY AND BECOME SURFACE BASED
   LATER IN THE DAY AS THEY SHIFT SEWD AND ENCOUNTER A
   WARMING/DESTABILIZING AIR MASS. OTHER STORMS SHOULD ALSO DEVELOP
   NEAR THE FRONTAL BOUNDARY BY LATE AFTERNOON AS STRONG HEATING
   WEAKENS CAPPING INVERSION. ONCE SURFACE BASED STORMS DEVELOP…THE
   COMBINATION OF MODERATELY STRONG INSTABILITY AND EFFECTIVE SHEAR AT
   30-40 KT WILL BE FAVORABLE FOR SEVERE STORMS. GIVEN THE STRONGLY
   VEERING WIND PROFILES AND NWLY FLOW ALOFT…THE DEVELOPMENT OF MCS/S
   WITH COLD POOLS APPEAR MOST LIKELY…WITH WIND DAMAGE THE GREATER
   THREAT…ESPECIALLY DURING THE AFTERNOON/EVENING HOURS.
  
   …LOWER OH/TN VALLEYS NEWD INTO NY/PA…
   AS UPPER TROUGH AMPLIFIES…HEIGHTS WILL GRADUALLY LOWER AND
   TEMPERATURES COOL ALOFT ACROSS THE REGION. ONCE TEMPERATURES WARM
   INTO THE 80S…MODERATE INSTABILITY WILL DEVELOP WITHIN MOIST AIR
   MASS LOCATED AHEAD OF THE COLD FRONT. ALTHOUGH WINDS ABOVE THE
   BOUNDARY LAYER WILL BE MOSTLY WLY/WSWLY…SPEED SHEAR WILL PROVIDE
   SUFFICIENT DEEP LAYER SHEAR TO SUPPORT ORGANIZED STORMS.  EVEN
   THOUGH MODELS VARY ON THE COVERAGE OF STORMS…THE AMOUNT OF
   INSTABILITY AND COOLER TEMPERATURES ALOFT SHOULD SUPPORT SOME SEVERE
   HAIL. HOWEVER…THE DEEP UNIDIRECTIONAL WIND PROFILES APPEAR MOST
   FAVORABLE FOR LINE SEGMENTS AND WIND DAMAGE. SINCE STORMS WILL BE
   DIURNALLY DRIVEN…THEY SHOULD DIMINISH QUICKLY AFTER SUNSET.
  
   ..IMY.. 07/15/2009

3 Responses

  1. Sensationalism is the defining characteristic of today’s media. It’s all about ratings and selling papers. Only when their credibility comes into serious doubt do they even begin to try to get the facts straight. The sad part is that most in our country seem to just lap up the bilge water these guys are pumping out with complete trust even though they have proven time and gain that they are not worthy of this trust. Our generation seems almost completely devoid of any critical thought with regards to the media they consume as evidenced by our last two national elections. Who do I vote for: Dan Blather and Oprah say BHO so he must be the guy. Why would they lie about something so important?? Sad. As for me I look at what our media puts out with a wary eye. If you’re able to glean the few facts they mix in with the editorial reporting it does have limited value. Very limited, unfortunately!

  2. So good to hear from you. Every time I wonder where you are, then you show up. I had a guy say that my numbers were all wrong since they measured unemployment diifferently in the 1930’s. I got the numbers from the Bureau of Labor Statistics. I guess he’s saying that the government is cooking the books.

  3. I like to keep you guessing! I read nearly every day but am not always in a position to comment. I’ve had an eventful month at work (maybe I’ll tell you about it sometime) and with my other commitments it has been difficult to give thoughtful comments as often as maybe I would like. Your blog offers a view of today’s events in an historical perspective; this is difficult to find and what keeps me reading, Mr. Symon! Plus, you’re a pretty good weatherman to boot!

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