The Economy is in Crisis! Really?

There is a lot of talk about the economy if you haven’t noticed. You can turn on the news or pick up a paper and read a report about “the economy in crisis.” I have heard news stories about how people are putting on recession pounds. The storyline goes since we are in such tough times we are cutting back on the dollars spent on food. This has the health experts worried because research supports a strong link between lower income and obesity. So because we are in a recession we are not eating well and putting on the pounds. More on this latter.

I have also heard of recent research coming out observing that people are not as unhappy as would be expected given the dire circumstances. The researcher’s explanation is that since everyone is hit with this recession, and everyone is worse off, it doesn’t seem so bad. If it would only hit one segment of the population then the level of discontent would be higher. But it is affecting everyone to some extent and we are all in the same boat.

Hmmm. I have a different take on this. MAYBE WE ARE NOT UNHAPPY BECAUSE THINGS ARE NOT SO BAD. Here’s how I got there. (Warning: The following section will contain some statistics. Do not read this if you are planning on operating heavy machinery)

I have heard it said that you can define a recession as when your neighbor looses his job and a depression as when you loose your job. So I was looking at New York State employment numbers. It turns out there may be some truth to that. Take a look at the following chart:

The gray vertical bars are the times when the nation was officially in a recession. You can see that during the three recessions that employment in New York State declined. But it is a little hard to see what’s going on in the current recession. The line looked flat but I couldn’t tell for sure so I created the same chart except it only shows January 2007 to November 2008.
One thing that I noticed was that New York State’s employment in November (represented by the red line)declined to the May 2007 level. I also noticed that employment GREW as the nation entered the recession. I found that very odd and checked out the other two recent recessions to see if that happened. It didn’t. Employment decreased every month in the 1990-1991 recession and the 2001 recession. But employment grew for a while in the current recession and in fact didn’t really begin to decline until September 2008 (the axis on the graph may make it seem like it happened earlier but it didn’t).

So then I became intrigued and looked into it further. The previous recessions both lasted eight months. The current recession began in December 2007 so we are almost a year into it (as far as the data goes). So the current recession is longer than the past two and based on all the news you hear you would think the wheels are falling off the nation. I mean all the Wall Street firms went belly-up. You would expect New York’s economy to be in the toilet. Well New York State has lost to November 2008 somewhere in the neighborhood of 21 thousand jobs. In the 2001 New York lost about 195 thousand jobs and about 240 thousand in the 1990’s recession. This translates into a 3% decline in the 90’s, 2.25% in 2001, and a 0.25% decline in the current recession. For those who just fell asleep or are confused with so many numbers check out the pictures.

So maybe we don’t feel so bad because it isn’t so bad. Yes the economy just lost a lot of jobs, but it has been gaining so many for quite some time. That’s why the unemployment rate is only at 7.2%. Now we could just be beginning the nosedive, but a lot of economists believe that we will be out of the recession by the middle of this year. I personally think that the media and politicians love to hype this up. It sells newspapers (or at least it used to when they were sold) and it gives politicians justification to put drastic policy measures in place to deal with crisis. After all that what we expect from our leaders.

So while we wait we worry and put on recession pounds. It is funny how that story came out right after the holiday season (the “worse one ever” by the way). Did you put on some recession pounds? Well don’t worry. Our leaders will solve the problem with the economy and we will loose weight in no time.