Filed under: Bad news, Economic data, Recession
The Financial Times was good enough to ask what the difference between a “recession” and a “depression” is. The paper did not have an answer. The author of the articles writes what any historian of the economy already knows: “From 1929 through 1933, the United States saw real economic output fall by nearly a third and unemployment soar from 3 per cent to 25 per cent.”
Depending on who is counting, the U.S. has had ten recessions since the end of WWII. These are identified by the classic definition that says a recession is two quarters of GDP growth shrinkage.
The oil embargo of 1973 caused the last really nasty depression that most Americans can remember. Unemployment went over 8%. In the 1981 recession, that figure moved over 10%.
What would a depression look like? Probably a period when GDP dropped by 5% for three or four quarters in a row and unemployment was steady above 10%. That may seem arbitrary, but the numbers would be much worse than any period since WWII. Almost no one living would remember a similar period. People’s memories of what is economically awful should be taken into account. Bad times are only really bad if someone can put them in reference to their own memories and experience.
Continue reading What is a ‘depression’?
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