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Wednesday, December 17, 2008

How bad is the November Employment Situation report?

The economy experienced a net loss of 533,000 jobs in November, compared with October. The loss since November 2007 is 1,870,000 jobs. That's bad, but exactly how bad?

It's the 6th worst monthly employment loss since we've been keeping track (since 1939), and the worst since December 1974. It's only the 28th largest loss over a 12-month period, and the worst since January 2002. But that's cheating, because employment today is larger than it was many years ago. So let's look at percentage losses.

Comparing November 2008 with October 2008, we experienced a decrease of 0.39% in payroll employment (a 1.35% decrease from November 2007). 12-month loss is only the 84th largest since 1939, and the worst since March 2002. (Keep in mind that during most of the period since March 2002, the economy has, net, added jobs.) The number of jobs lost over 12-months, in other words, is not--yet--all that large.

The percentage loss in jobs from October 2008 to November 2008, however, is a lot more worrisome. It's the 6th largest since 1960 (and the 41st largest since 1939). Of the 5 worse month-to-month percentage job losses since 1960, 4 occurred in the 1974/1975 recession--and only one occurred in the 1980-1982 twin recessions. That is, monthly job losses as large as this most recent job loss have, since 1960, occurred only in the worst recessions we've had. By way of contrast, the largest percentage job loss in the 1990-1991 recession was 0.28% in February 1991; the largest in the 2001 recession was in October 2001 (-0.25%). What happened in November was half again as large as the biggest losses that occurred in either of the two past recessions. And it comes immediately after losses in October (-0.23%) and September (-0.29%) that were essentially as bad as the worst monthly losses in the two preceding recessions.

With a job loss of 1.38% since the beginning of the recession in December 2007, we have a way to go to match the job losses in the 1980-1982 recession, -3.10%, or in the 1974-1975 recession (-2.69%). We're not all that far behind the 2001 recession, after which the economy continued to lose jobs until 2003 (a total of -2.02%, but only -1.23% during the "official" duration of the recession). And we're already closing in on the 1990-1991 recession (-1.48%). Given the continuing flow of bad news, December is shaping up to be a worse month than November, and the early months of 2009 do not look much better.

At least from the employment perspective, this could easily challenge 1980-1982 as the worst recession since the Great Depression.

UPDATE: Check out the discussion of the severity of the current recession in historical context on the Atlanta Fed's Macroblog.


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