NEW YORK (MainStreet) -- The Federal Reserve Bank of Dallas has placed its official stamp on a perception obvious to financially struggling Americans: the recent Great Recession was the worst economic period in the U.S. since the Great Depression, and no other recent economic downturn is even close in comparison.
The data from the Dallas Fed comes at a time when a growing number of economists believe the U.S. may be in danger of dipping back into recession. That sentiment is fueled by higher unemployment, lower consumer confidence, a toxic Eurozone economic environment, and a shrinking U.S. manufacturing base.
Just about the only good news for consumers comes as a result of the recent panic in the markets about the world slipping back into recession: oil prices have dropped on global growth fears to $84 per barrel, down from a high of $109 per barrel in February and average U.S. gas prices have fallen to $3.61.
It’s not like the U.S. economy is out of the woods any way you look at it, even including less pain at the pump.
In a white paper from the Dallas Fed, “Branding the Great Recession,” Thomas Siems, senior economist, asks the following question:
“Was the 2008 global financial crisis and economic downturn -- often branded the Great Recession -- the worst U.S. contraction since the Great Depression of the 1930s? And how has the subsequent recovery compared with previous recoveries?”
He dispatches the first question easily, noting that the average length of a recession is 10.4 months, and that economic output averages a decline of 1.8% in the 10 recessions sandwiched between the Great Depression and the Great Recession.
But the recent downturn was off the charts in comparison, with a recession of 18 months and a GDP decline of 5.4%, according to data from the National Bureau of Economic Research.
Siems uses the 1991, 2001, and 2008 recessions as his primary benchmarks -- and the comparison aren’t even close.
“Compared with recessions since the early 1950s and examining real GDP, the 1991 recession was fairly typical, whereas the 2001 downturn was arguably not a recession at all,” he writes in his report. “But the 2008 recession hit new depths and lasted nearly twice as long as an average economic contraction.”
Siems also notes that the recovery period on the heels of the Great Recession was “longer and slower than usual.” He says the average recovery period for the economy is about two quarters. But the Great Recession took nine quarters to match pre-recession output levels, and even then the economic growth rate has been half as much (2.4% to 5.2%) than after the previous ten U.S. recessions.
The Dallas Fed economist also says that it took 31 months for the job market to recover from the 1991 recession, and 47 months to recover from the 2001 recession. The timer is still ticking on the Great Recession and employment recovery, Siems notes.
“At more than four years since the recession began, nonfarm payroll employment is still 3.7 percent below the prerecession level, and it is likely to take many more months of solid job gains—perhaps another two to three years—before employment fully rebounds,” he writes.
In the final analysis, describing the Great Recession as the worst economic period for the U.S. since the Great Depression is something struggling Americans will consider by now a pretty obvious point to make judging from their immediate surroundings -- from neighbors' foreclosure signs to the ranks of the unemployed they know personally.
So the Dallas Fed isn't about to shock anyone, but does provide Uncle Sam’s "sympathetic" stamp of approval on just how difficult the past few years have been compared with almost any other recent difficult period in the history of the U.S. economy.