Worst economy since the Great Depression

From the Jan 13th issue of Time Magazine:

The slump is the longest, if not the deepest, since the Great Depression. Traumatized by layoffs that have cost more than 1.2 million jobs during the slump, U.S. consumers have fallen into their deepest funk in years. "Never in my adult life have I heard more deep- seated feelings of concern," says Howard Allen, retired chairman of Southern California Edison. "Many, many business leaders share this lack of confidence and recognize that we are in real economic trouble." Says University of Michigan economist Paul McCracken: "This is more than just a recession in the conventional sense. What has happened has put the fear of God into people."

(oops, forgot to mention the year: this article is from 1992, during what in retrospect turned out not to be much of a recession at all.) [via Marginal Revolution]

If you’re one of those who thinks President Obama is inheriting “the worst economy since the Great Depression”, please check out two years: 

1982 [via David Leonhardt in NYTimes]

The first big blow to the economy was the 1979 revolution in Iran, which sent oil prices skyrocketing. The bigger blow was a series of sharp interest-rate increases by the Federal Reserve, meant to snap inflation. Home sales plummeted. At their worst, they were 30 percent lower than they are even now (again, adjusted for population size). The industrial Midwest was hardest hit, and the term “Rust Belt” became ubiquitous. Many families fled south and west, helping to create the modern Sun Belt. Nationwide, the unemployment rate rose above 10 percent in 1982, compared with 7.2 percent last month.

and, of course, 1973.

I wouldn’t trade today’s situation for either of those two years, and not just because today’s economy is by comparison so much better. It’s impossible to know the future, so who knows and maybe things will get a lot worse. But meanwhile it’s important not to over-react based on over-dramatic headlines.