It's Still a Depression

8/10/2009
by James Turk


Given all the euphoria after the unemployment number was released on Friday, one would think that the economic contraction had ended. Unfortunately, the euphoria was misguided. The reality is that unemployment continues to worsen. Nonfarm payrolls in July continued the dreadful, protracted decline that began from the peak of employment in November 2007. The only thing that has changed is that the rate of decline has lessened. In other words, the rate at which jobs are being lost is declining, which obviously had to happen sooner or later. The accompanying chart presenting the unemployment rate overlaid on top of recessions is not a pretty picture. Note the width of the gray line of the current economic situation compared to past recessions. We are in the longest economic contraction in the post-war period, which basically means we are in the worst contraction since the Great Depression.

The second chart isn’t much better. It presents the decline in GDP in two ways. The blue line shows the headline rate of contraction. The red line shows the contraction in GDP, excluding the government. There are different ways to interpret the message from this chart.