GREAT RECESSION VERSUS THE GREAT DEPRESSION - III

In this comparison of the Great Recession to the Great Depression, a look will be taken at an economic comparison and what, seems to me, to be rather a revisionist examination made in 2014 by Neil Howe  in that, while the GDP increased exceptionally well, unemployment remained high.*  One similarity is that both these "Greats" were financial collapses that were different from your ordinary recession which are usually due to inventory buildups.  Part I concerned the emotional hangover from the Great Depression and Great Recession.  Part II concerned the economics of some of the Rust Belt of states prior to and including the Great Recession.  The Great Depression did not have a cascade of job losses prior to 1929 that happened prior to the Great Recession (see Part II).

In the figure below, it is seen that the GDP has been slowly increasing since 2009, the depth of the Great Recession.  In contrast the dip in the Great Depression that started in 1929  had the GDP of the U.S. rising sharply less than five years after its beginning.

I was born in 1931 so I was only 10 yrs 8 mo. old at the beginning of WW-II and the GDP is shown to be well into positive territory see figure below).  Although my memory is limited, my main memory was that you could get a good-sized chocolate candy bar for a nickel and some bars were three for a dime.

The other thing I remember is men coming door to door and asking if they could mow the lawn or do other odd jobs for food.  My mother used to give them something but would not invite them inside.  I also remember a man coming to the door with a basket full of fine China (made by a German company) having marbleized centers and a gold rim.  My mother had also bought some of this same China a few years earlier (I don't know if it was from the same man).  So my memory is not conducive to their being good times prior to WW-II and  all studies do show unemployment to still be very high by 1939 and 1940 though they differ on the percentage unemployment (9.5% or greater).

In spite of my memories of the late 1930s, GDP bottomed in 1932 - 1933 and began a steep rise.  In contrast, the GDP decline was not as great in the Great Recession but bottomed in 2009 and began a relatively slow but steady rise. 

(Click on figure to enlarge)

Though the percentage drop in the stock markets were comparable between the two Greats, the  recovery of the stock market after the Great Recession has been quite remarkable and much better than for the Great Depression.  The figure below shows the comparison for the Dow Jones Industrial Average (The increase has continued beyond the period in the figure and has been repeatedly been setting new all-time highs lately for all four principal indices (DJIA, S&P 500, NASDAQ Composite, and Russell 2000).**

(click on figure to enlarge)

Quoting Mr. Howe, however, suggests a roaring economy for the Great Depression, "GDP grew at a blistering average rate" (though unemployment remained high):
What’s more, from 1933 on, U.S. GDP grew at a blistering average rate of over 8% per year for the next eight years. And that includes one recession year: 1938. By 1941, 12 years after the Great Depression began, U.S. GDP was 41% higher than its pre-downturn figure. This is almost certainly a much higher level, relative to 1929, than the United States will see by 2019, relative to 2007.*
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Mr. Howe does conclude that:
These parallels between eras are so numerous and striking that they are hard to miss once we look broadly at the direction of events. That’s why connecting the economic challenges of the 1930s with those of the 2010s, and seeing them as comparable in some respects, makes a difference. When we are connected to history, we can comprehend better what else is happening in the 2010s, predict better what is likely to happen next, and to figure out, if necessary, how we can avoid an outcome that we regard as especially dangerous.


Note On Recessions A list of the Recessions in the U.S. can be seen in Wikipedia including the dates, duration, interval time between recessions, peak unemployment, and GDP decline.** * The GDP decline of the Great Recession is seen to have been only greater during the Great Depression and the "recession" of 1938 (I would say it was a part of the Great Depression) and the recession of 1945 that occurred while industry converted from wartime production back to peacetime.  Though the GDP decline in 1945 was larger than for the Great Recession, unemployment in 1945 did not reach the depths of the Great Recession.  The only recession worse in unemployment than the Great Recession was that of the long recession of the early 1980s, though the long recession of 1973 - 1975 came close.

* http://www.forbes.com/sites/neilhowe/2014/11/25/are-we-reliving-the-1930s/#57204a703a6c
** https://en.wikipedia.org/wiki/Comparisons_between_the_Great_Recession_and_the_Great_Depression
*** https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States
https://www.thebalance.com/us-gdp-by-year-3305543