The most startling indicator is unemployment. During the Great Depression, which lasted from 1929 to 1939, millions of jobs were lost, but its record high of 15 million occurred in 1933 when nearly a quarter of the working population was unemployed. During the Great Recession, which lasted from December 2007 to June 2009, nearly 9 million jobs were lost.
These numbers are eclipsed by the more than 16 million jobs that evaporated between March 15 and April 4 of this year, as indicated by applications for unemployment benefits.
“We haven’t seen all of the layoffs and all the [business] closures and all the people who are going to end up unemployed yet,” said Jeffrey Miron, an economist at Harvard University and the Cato Institute, a libertarian think tank.
The unemployment rate was 4.4% in March, according to the Bureau of Labor Statistics, but the mass layoffs occurred so quickly that the March rate doesn’t capture the majority of unemployment. Taking into consideration just the claims for unemployment benefits filed in the second part of March, the unemployment rate is already well over 10%. Goldman Sachs predicted that the rate would rise to 15% in the months ahead.
That would be far worse than the worst of the Great Recession in 2009.
It would still be far off, though, the worst joblessness of the Great Depression, when the unemployment rate hit 24.9% in 1933.
Yet those rates are not necessarily directly comparable. The vast majority of those who have been laid off in the past month lost their jobs because their businesses were ordered to shut down. In the best-case scenario, they could be quickly rehired if the pandemic threat were mitigated.
In comparison, the Great Recession and Great Depression featured terrible permanent dislocations. The number of workers who remained jobless for 27 weeks or more, considered long-term unemployed, peaked during the Great Recession at 4.4%, according to the Labor Department, making up nearly half of the unemployed in 2010. It was not until mid-2014 that the economy recovered the over 8 million jobs that were lost during the recession. In the Great Depression, more than half of all unemployed workers from 1933 to 1936 faced an unemployment spell of more than a year’s length, according to a Social Security Administration review of manufacturing workers.
In comparison, the share of long-term unemployed workers is low today, given that the vast majority of unemployed workers were laid off suddenly in the past three weeks.
For gross domestic product, the worst has yet to arrive in the U.S. Recent figures produced by the Commerce Department show positive growth because the coronavirus had yet to fully affect the economy.
Goldman Sachs projects that GDP for the second quarter will be -34% at a seasonally adjusted annualized rate.
That would be larger than what was experienced for any quarter during the Great Recession. The largest decline between December 2007 to June 2009 was in the fourth quarter of 2008 when GDP dropped -8.4% at a seasonally adjusted annualized rate, according to the Bureau of Economic Analysis.
The BEA does not show quarterly GDP activity for the Great Depression. However, the largest annual drop in GDP for the country occurred in 1933 when it fell 12.9%, according to the BEA.
The coronavirus pandemic has also generated stock market movements as extreme as any seen since the Great Recession and Great Depression.
Stocks plummeted 11.98% on March 16, the third-largest daily decline in the history of the Dow Jones Industrial Average.
That drop was larger than any daily loss in the Great Recession. The largest decline then was Oct. 15, 2008, when the index declined 9.04%.
During the Great Depression, the largest drop for the index occurred on Oct. 28, 1929, when it fell 12.34%.
What about the stimulus and trillions of dollars pumped in. Any comparisons to previous events. Story half told