“Memory Lane” takes a stroll through financial history because the economy has a funny habit of repeating itself.
Buzz: “Recession or not” is the hot debate after the widely watched U.S. gross domestic product fell in back-to-back quarters. It’s only the 11th time such consecutive contractions have occurred since 1949. Except there’s a historical “but” in the data — the year’s first-half job growth easily exceeded that seen in the previous 10 double-dips.
Source: My trusty spreadsheet compared the average economic performance in these 11, six-month periods with double-dips in GDP, a broad measure of the nation’s economic output (adjusted for inflation). We looked at GDP, unemployment, job growth wage increases (for goods-making workers), and inflation by the Consumer Price Index — all using annualized changes.
Yes, 2022’s first half and its “whatchamacallit” saw two GDP dips averaging 1.3% annual declines. Yes, double-dips do fit one definition of “recession.”
Fueling the declines were several factors, including the end of many of the pandemic’s economic stimulus programs, the Federal Reserve chilling an overheated business climate, consumers and corporations adjusting to high energy prices, and certain industries pulling back as spending patterns morph from red hot to a calmer, new normal.
However, let’s note we’ve had no decision from the “official” arbiters of U.S. recessions. That’s a group of private-industry analysts from the National Bureau of Economic Research who’ll review a wide range of business stats in the coming months.
So, let’s look at 2022’s “whatchamacallit” with history-colored glasses. You’ll see common themes such as inflation, international tensions tied to energy, rising interest rates and the pandemic.
We also learn that this year’s economy — January through June — suffered a mild stumble compared with 10 other periods of consecutive GDP contractions.
- This year’s average GDP drop is the smallest of these double-dips.
- The first half’s 3.7% unemployment rate ranks second-lowest of the 11.
- Jobs grew at a 4.5% annual rate, the best performance among these consecutive contractions. Jobs were flat on average vs. the year-ago period in the other 10 double-dips.
- Workers are getting raises averaging 5.7% a year, though that’s below the 6.2% pace of the 11.
- Let’s not forget 2022’s inflation problem. The 8.3% average so far this year is the fourth-worst of the double-dips.
Let’s take a stroll down Memory Lane and the previous 10 double-dips. Portions of these dips were eventually deemed part of an “official” recession …
1949: The end of the post-World War II spending boom ended with two consecutive GDP drops averaging 3.4% annual declines. These six months saw 5.3% average unemployment and job losses at a 1% year-over-year pace. Wages were rising at a 7.7% annual rate vs. inflation at a mere 0.5%.
1953: The Korean War’s end slowed the economy to a 4.1% GDP dip with 3.2% unemployment and 1.8% job growth. Raises: 6.6%. Inflation: 0.7%. This recession had a trio of consecutive GDP slides.
1958: An Asian flu pandemic created global business headaches and a 7.1% GDP drop with 5.6% unemployment and 1.6% job loss. Raises? 3.6%. Inflation? 3.3%.
1970: An inflation battle — including President Nixon’s price controls and Fed rate hikes — led to a 1.3% GDP decline with 3.9% unemployment and 2.7% job growth. Raises grew by 7.5% while inflation ran at 6%.
1974: The first Arab oil embargo cut US GDP by 2.6% with 6.1% unemployment, but jobs still grew 1.2%. Raises of 9.4% trailed inflation at 11.8%. This recession went back-to-back-to-back with GDP slides.
1980: The second embargo fueled a 4.3% GDP tumble with 7.5% unemployment and just 0.3% job growth. Raises of 8.6% were well behind inflation at 13.7%.
1982: A very aggressive Fed fight against inflation fueled a 5.2% GDP crash with 8.5% unemployment and 0.1% fewer jobs. Raises of 8.7% were a smidge ahead of an 8.6% rise in the cost of living.
1991: More Middle East tensions and the collapse of the U.S. savings and loan industry were backdrops for a 2.8% GDP dip with 6.4% unemployment and stagnant job counts. Raises of 3.2% trailed 5.8% inflation.
2008: A global real estate and financial meltdown pushed GDP down 5.3% as joblessness ran 6.4% with 1.3% job losses. Raises of 3.9% beat inflation at 3.4%, but the GDP losing streak eventually grew to four quarters and the Great Recession.
2020: Coronavirus lockdowns knocked 18.2% off GDP over six months — most of that in the second quarter — with an average 8.4% unemployment and 5% job losses. Raises at 2.9% vs. 1.3% inflation.
The rarity of back-to-back GDP flops — just under a dozen in nearly three-quarters of a century — makes for legitimate unease over 2022’s “whatchamacallit” cooldown.
To me, it feels like a good time to boost the rainy day fund and avoid big risk-taking. It might even be a bad time to buy a home, especially at today’s current asking prices.
Yet this year’s cooler-but-still-robust job market to date is the big “it’s different this time” hangup to any “recession” designation.
That’s not an economic technicality. It’s a tangible benefit to the nation’s worker bees.
And these worker-friendly conditions could help ease the financial pain of those already getting hurt in recent economic turmoil.
Two “official” post-World War II recessions called by the bureau did not have consecutive GDP contractions — 1960 (a slump tied to John Kennedy defeating then-Vice President Richard Nixon for the presidency) and 2001 (a downturn highlighted by the 9/11 terror attacks and the dot-com flop).
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]