If you can remember any real excitement about the Spice Girls or the Hansen Brothers when their first albums debuted, this recession is probably your first as a participating, affected adult.
Ignorance is (or was) bliss, of course.
Why does this downturn feel more intimate, more vengeful, than other recent recessions?
Two key elements are making this recession so much more personal. At no time in our nation’s history have we had so much of our money tied up in our houses. Falling house prices have squeezed almost everyone, and strangled some. At the same time, the gradual growth of 401ks as our primary way to save for retirement is at an all-time high, with much of those savings invested in the stock market. We know, when we watch the Dow, the Standard & Poor’s 500 and Nasdaq indexes tick down, down, down over a few months, that it means we will be working longer and retiring later than we’d planned.
Each downturn has its own story and personality, and this one is no different. Officially, it started in December 2007 and is now in its fifteenth month. Triggered by staggering risks taken by financial companies in their mortgage-securities departments, this recession’s drumbeat of awful news pounded the stock market down 50 percent in the space of a few months, helping to suck $5.1 trillion out of our combined household wealth in the last quarter of 2008, the Federal Reserve said last week.
Here are some clues to understand why this recession feels so different from the deep ones of the mid-70s and early 80s, and the more recent blips in 1990 and 2001.
In deep recessions, jobs suffer. Job losses in the mid-70s and early 80s, in percentage terms, are comparable to what we’re experiencing today. Yet the 2007 economy started out with a bigger work force, so the sheer number of jobs lost is much higher already. In 70s and 80s, soaring energy prices sparked stock market and job declines, but the pain was mostly felt in the U.S. Companies benefited then by still being able to export their products abroad and make money that way. Hiring quickly resumed quickly after the low.
This time around, the world is suffering along with us and net exports are sinking.
The recessions in 1990 and 2001 were shorter and milder. They lasted only about half the time of the earlier two, and the percent of jobs lost was half as much. In 1990, the country was still feeling the effects of another banking crisis, this one caused by real estate investments made by savings and loans. The first Gulf War made the country more skittish and consumers reined in their spending, slowing the economy.
Bets gone bad on technology start-up stocks led to the market bust in 2001, and the economy shed jobs and profits as a result. On September 11, 2001, terrorists used airplanes to attack the country, sending the stock market spiraling further downward.
But the hangover has gotten more severe. Unlike the recessions of the 70s and 80s, job losses continued for fifteen months in the 90s and nineteen months in 2001. That’s a long time for people to be out of work, to feel the stress of being without a regular paycheck. The average time for hiring to pick up after a recession is just 4.8 months.
Is that extended stretch of job losses a new trend, or will this current recession have more of an average recovery? The longer we must worry about our jobs—and the less money we have to spend—the more “personal” this current downturn will feel.
