What's Happened in the 10 Years Since the Economy Fell Apart
(Bloomberg View) -- The last recession was deemed after the fact to have begun in December 2007. It's more accurate to say that the previous economic recovery ended in December 2007, since the Business Cycle Dating Committee of the National Bureau of Economic Research "determined that a peak in economic activity occurred in the U.S. economy" that month. But the general custom is to date the start of a recession to the previous business cycle's peak, so December 2007 it is, meaning that this business cycle has just wrapped up its 10th year.
Most of the economic data from the end of 2017 isn't available yet, so one cannot do a full 10-year retrospective. The Bureau of Labor Statistics did release its December jobs report last Friday, though, so that's a good place to start. Inspired in part by Bill McBride's famous "scariest jobs chart ever," I've structured the following charts as comparisons that pit the past decade against the 10 years after the starts of four of the five previous recessions (I skipped the recession that began in January 1980 because the subsequent recovery was stamped out after just a year by Paul Volcker and his fellow inflation-fighters on the Federal Open Market Committee). First, here's the change in nonfarm payroll employment:
Yes, this last recession was especially awful. That's why they call it the Great Recession! The subsequent jobs recovery has been long and steady, and by this point has far outdistanced the recovery of the 2000s. But it's been weaker than the jobs recoveries of the 1970s, 1980s and 1990s.
Part of that weakness can be explained by slowing population growth, which exerts a drag on job growth. Measured by the unemployment rate, this business cycle has been more impressive:
The unemployment rate has fallen more over the past 10 years than during any other post-1970 business cycle, and is now almost as low as in the boom times of the turn of the millennium. Then again, the unemployment rate, as President Donald Trump complained repeatedly during his campaign but has for some strange reason gone silent about since, is a flawed measure. It counts only people who are actively looking for jobs, meaning that those who have given up are ignored.
The employment-population ratio, which simply divides the number of people with jobs by the civilian non-institutional population, doesn't have this problem. Here's the ratio for those ages 25 through 54 -- "prime age" workers, according to the lingo:
That's ... a little hard to decipher. One issue is that women were entering the workforce in a big way in the 1970s through 1990s and driving up the employment-population ratio, thus muddying comparisons over time. So here's the employment-population ratio for just the men over those five 10-year periods:
The employment-population ratio among prime-working-age men is much lower than it was when the recession started, and it's low by historical standards. But it has at least been rising faster since the trough of the recession than it did in past cycles.
Finally, here's one non-job-related indicator for which we have December data: the performance of the Standard & Poor's 500 Index.
These numbers are not adjusted for inflation, so the performance over the decade starting in November 1973, during which the consumer price index rose 120 percent, should be discounted heavily, and that for the decade starting July 1981 (49 percent CPI rise) discounted somewhat. Still, the current stock market has an awfully long way to go before its performance over the course of the business cycle is anywhere close to that of the 1980s and 1990s bull markets.
Which fits: The past 10 years have seen a weak recovery after a brutal recession. But hey, at least that recovery is still going. It is now the third-longest U.S. expansion on record, in fact, and is closing in on No. 2 (which ran from February 1961 to December 1969; the longest was from March 1991 to March 2001). Maybe, if it keeps going long enough, it will be remembered for its duration more than its weakness.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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