President Harry S. Truman once quipped, “When a neighbor loses a job it’s a recession; when you lose your job it’s a depression.” Although Truman’s words were spoken more than a half of a century ago, its relevance to the lives of Americans living in the early 21st century is tangible, evident in all reaches of society. An economic recession is not someone else’s problem.
Economic Recession Definition
A recession is described as a decline in a country’s gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year. According to a recent article on CNNMoney.com, the recession of 2007-2009, at 18 months, was the longest in the history of this country. Recessions of November 1973 to March 1975 and July 1981 to November 1982 lasted 16 months each. And although many may have long ago grown weary of economic forecasters and news anchors punctuating their remarks with expressions such as “In these challenging economic times,” who can question the appropriateness of the sentiment?
The Current State of the American Economy
Regardless of diction, syntax, or semantics, while the official end of the recession was recorded as June 2009, joblessness rate continues at 9.1 percent (as cited by the U.S. Bureau of Labor Statistics) with nearly 14 million persons unemployed in June 2011. In May 2011, a mere 54,000 jobs were added to the workforce. Not included in this statistic is the number of unemployed people who are so discouraged that they have discontinued their search for a job.
During the period from December 2007 to June 2009, “the American economy lost more than 5 percent of its nonfarm payroll jobs, the largest decline since World War II. And through December 2009, the month that employment hit bottom, the nation had lost more than 6 percent of its jobs,” according to the New York Times. While these are indeed sobering statistics, it is noteworthy to point out that the periods of economic expansion have lasted 5 times longer than recessionary periods. That is, for every 10-month recession in our nation’s history, there has been, on average, a five-year economic expansion (Economic Recession History).
The official agency that is responsible for determining the beginnings and endings of recessions is the National Bureau of Economic Research (NBER). However, the Bureau makes its determinations on a delayed basis. “The Nasdaq Index lost over 43% from its high before the NBER determined we were in our last recession. It took them nine months after the beginning of the recession to announce it had begun” (Economic Recession History, 2010, para. 2,). An economic trough must be determined in order to signal the end of a recession. The NBER determined “that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion” (NBER Statement). The NBER, as a matter of record, is deliberate and methodical when determining both the beginning and end of a recession. And it is cautious in particular when determining a recession’s end. Historically, the NBER has been slower to determine the ends of recessions than onsets by a margin of more than 2-to-1. With regard to the last four recessions, official notification of the beginning came an average of 228 days after the recession had already begun; the end(s) were officially announced an average of 522 days (17 months) after they were over (Global-Financial-Crisis.org).
History of U.S. Economic Recessions
The United States has withstood at least 10 such recessions since World War II, each lasting an average of 10 months, as cited About.com. Mike Kohr in an article in Oped News points out that “ten of the last eleven recessions have occurred under the direction of Republican economic policy.” He goes on to state that the 2008 and 1982 economic collapses were the result of deregulation and an absence of responsible leadership of the financial markets together with a tight credit policy. Both periods found a Republican occupying the White House. While it might be true that a republican occupied the Oval Office during these periods of economic collapse, one must keep in mind that republicans have also inherited dire economies from democratic administrations. Additionally, it can hardly be said that one person solely contributed to the downfall of the nation’s economy.
Alarmingly, for the first time since the 1970s, all 50 states weresimultaneously in a recession in 2009, cited by MarketWatch. More recently, the state of Texas has shown evidence of growth while emerging from the recent recession. Between May 2010 and May 2011, Texas gained 205,400 jobs. “By early summer 2011, 80 percent of the jobs shed by employers during Texas’ shorter recession have already been recovered as our economy recovers more quickly than the U.S. as a whole. Nationally, only 20.5% of recession-hit jobs had been recovered ending 2010” (Comptroller’s Economic Output).
If anyone believes that this is the first economic downturn of this nature, one need only consult historical sources. Prior to the most recent recession, the most widely dispersed downturn on record was the 1982 recession in which 43 states were simultaneously contracting (MarketWatch). Over the past 30 years, at least one state had been growing economically every month. A February 2009 index showed that Louisiana was growing while the other 49 states were not. The last time all 50 states were growing was December 2006. The nation has faced periods of dire economic straits since shortly after it was founded.
The “Panic of 1797” erupted as Britain waged war with France. As a result of a run on the Bank of England, funds were not available to pay depositors causing a depression throughout Europe as well as across the Atlantic Ocean. “Real estate markets crashed first in the coastal United States and then spread inland” (Lynch, 2008, para. 9). Land speculation that began in earnest in the 1790s in the West inflated property values with banks financing the speculation. By the turn of the century “bankruptcies proliferated throughout the land resulting in numerous American bankers and merchants being sent to debtor’s prison” (Lynch, 2008, para. 9). While the real estate bust of the early 21st century affected millions of people, it was not the first time the nation’s land values plunged.
19th Century Recessions
There were five “panics” and one “depression” in the 19th century which were brought on by events such as: failure of the Reading Railroad; failure of Jay Cooke and Company, the largest bank in the U.S.; a run on Knickerbocker Trust Company deposits; and runs on both gold and silver supplies. Certainly there were many other contributing factors, as there were when Lehman Brothers, Goldman Sachs, and General Motors had economic crises recently, but these were some of the leading causes of national economic failure.
It has been just over two years since the end of the most recent recession. The rhetorical link with dire economic times has subsided slightly; one can only imagine how a presidential election in 2012 will affect the future direction of this nation’s economy.