Today’s hideous jobs report has everyone reaching for historical analogies. But there really aren’t any that fit. Even the most dire comparisons fail to capture just how bleak our situation really is.
In a big downer blog post about today’s “dreadful” numbers, David Leonhardt explains that the “share of adult men with jobs, which has been gradually falling for much of the last few decades, is now at its lowest level since the labour Department began keeping records in 1948.”
The nearest historical comparison he can find is the 1980 to 1982 recession. “Just about every economist thinks that the labour market will continue to get worse, which means it’s on a path to be in its worst shape since the painful recession of the early 1980s,” he writes.
But that recession was caused by interest rate hikes brought about by Paul Volker, who was then chairman of the Fed Reserve. Volker was the ultimate inflation hawk, and he hiked interest rates up toward 20%. It’s understandable that you’re going to get job losses when you’ve pushed interest rates up that high.
Our jobs losses are coming at a time when the Fed is doing the opposite, dropping the interest rate almost as low as it can go. Last night, an analyst at Goldman Sachs predicted the Fed will drop rates another 50 basis points by the end of the year. The fact that we’re seeing this many job losses while money is dirt cheap would seem to indicate that our economic condition is far more dire than anything we went through in the 1980s.
Anyone got a better comparison?