September 24, 2010
Recessions and Recoveries Are Not All the Same
By FLOYD NORRIS
In the old days — before 1990 — American recessions tended to be fairly sharp. But the recoveries, when they came, were also rapid. Laid-off workers were recalled and consumers who had deferred purchases out of fear they might lose their jobs were willing again to buy cars and homes.
The newer version of recessions — in 1990-91 and 2001 — provided shallower downturns. But the aftermath was also slow and painful. They came to be known as jobless recoveries.
The National Bureau of Economic Research determined this week that the recession that began in December 2007 ended in June 2009. That made it the longest downturn since World War II, and data had already shown it was the deepest in terms of decline in gross domestic product.
And now that we know the recovery is more than a year old, it appears that this cycle is combining the worst of both worlds: deep fall followed by slow recovery.
There are many reasons for that, and some exceptions to the pattern. Manufacturing appears to be recovering faster than it did after the two recent recessions. But construction, which had boomed to a greater extent than ever earlier in this decade, remains more depressed than usual.
The accompanying charts compare various aspects of the last four recessions — the two followed by slow recoveries and the last of the old type, as well as the latest downturn.
The lines all begin with the official beginning of the recession, allowing an easy comparison of how much worse that particular aspect of the economy became as the recession went on. The ending months of each recession are shown at the same point, making it easy to see how severe the downturn was and how rapid the recovery.
There are some aspects of this cycle that have no direct precedent. One is the performance of service industries. For most of the years after World War II, the United States economy became more and more oriented toward service jobs, and both employment and spending rose, whatever the state of the rest of the economy. But this time service businesses suffered, and they have been slow to recover.