Worst slump since WWII? It wasn't this latest one
Boston — Edward J. Gibson, a stockbroker, has just had some ''fun with numbers'' and concludes that the 1981-82 slump ''wasn't the worst recession since the 1930s.''
The First Albany Corporation ''rep'' says, ''Nobody's stopped and looked at the numbers and asked, 'Was it really?' ''
Of course, if you measure the depth of a recession by looking only at the unemployment figures, the last recession was the worst. The number of jobless reached 10.8 percent of the civilian labor force in December, actually one month after the November trough of the slump. That was well above the previous 9 percent peak during the 1973-75 contraction.
But Mr. Gibson has put together all sorts of other economic measures which show that the 1981-82 downturn, although a bad one among the eight post-World War II declines in business activity, was exceeded in its grimness by the 1973- 75 recession and in some ways, in fact, by other previous recessions.
Dr. Geoffrey H. Moore, director of the Center for International Business Cycle Research and the dean of business cycle experts, says the latest contraction falls in the ''sharp-recession class,'' along with those of 1973-75, 1953-54, and 1948-49. ''But it was not the worst,'' he agrees.
Even those jobless figures - high as they are - can be softened somewhat by other statistics. Dr. Moore, for example, notes that the increase in unemployment was not exceptionally large. Unemployment was high even before the July 1981 start of the recession. That's because the previous mild recovery lasted only 12 months, until it was killed by tight money and super-high interest rates.
Further, Mr. Gibson points out, the percentage of the total working-age population slipped during the last recession to 56.4 percent (see table). ''On this basis,'' he adds, ''the employment situation in the trough of the 1980-82 recession was better than during any prior recession except 1980. The difference . . . results from the fact that, since the 1960s, there has been a rapid rise in the proportion of those in the working-age population who regard themselves as part of the work force.''
In fact, that 56.4 percent figure at the trough is the same as at the height of the 1929 boom year just before the Great Depression, Dr. Moore says.
More women are in the work force nowadays. ''They enter and leave the work force rather frequently,'' Dr. Moore notes. When they return and start looking for work, they are counted among the unemployed.
Further, with unemployment insurance payments now available for many of the jobless, people tend to shop around longer for suitable positions. In fact, the value of the average unemployment benefit in 1982 of $119 per week was exactly the same in 1982 dollars as the average earnings per week in the boom year of 1929.
''That's no reason for thinking we are giving too much to the unemployed,'' Dr. Moore cautioned. ''But it does take people longer to find work.''
The longevity of the latest recession, now that the National Bureau of Economic Research has declared last November as its trough, matches that of 1973 -75 (see table).
But Mr. Gibson's analysis finds that several other statistical series show that this last slump was not as bad as others in the postwar period:
* Industrial production dropped 12 percent, with output of autos and steel especially hard hit. Yet, the decline was 15 percent in 1973-75 and 13 percent in 1957-58.
* Real gross national product - the nation's total output of goods and services in constant dollars - slipped some 2.2 percent. GNP dropped 4.9 percent in 1973-75, however; 2.7 percent in 1957-58; and 2.6 percent in 1953-54. By this broad measure, the latest recession was the fourth-worst slump.
* Inflation-adjusted personal income rose 0.8 percent during this last recession. It rose also during the mild recessions of 1969-70 and 1960-61, but it fell in all others, including a 2.8 percent drop in 1973-75.
* Net financial assets of individuals (total financial assets less all liabilities) rose 8.7 percent from the end of the quarter prior to the start of the recession to the end of the quarter during which the recession ended. That's because individuals were building up their cash positions (more than during any other postwar recession) and stock prices rose handsomely toward the end of the recession. By contrast, these financial assets declined 21.8 percent during the 1973-75 recession, when inflation was high and stock prices were declining.
* Corporate earnings dropped 19 percent during the 1981-82 recession. This was the third-most-severe decline. They dropped 21 percent in the 1948-49 slump and 23 percent in 1957-58. Further, if these earnings are restated in constant dollars, adjusted to eliminate profits arising from higher inventory valuations, and altered to base depreciation charges on replacement cost rather than historic cost, so-called ''real'' corporate earnings declined a mild 6 percent. That compares with a drop of as much as 33 percent in the 1973-75 slump. Mr. Gibson concludes that the ''quality'' of earnings improved sharply during the last recession.
One reason the last recession may have felt so bad, Mr. Gibson figures, was that it occurred only one year after the previous one. Some have held that the two recessions should be regarded as one. But Dr. Moore notes that during the short expansion such key measures as GNP rose and unemployment fell sufficiently that the 1981-82 recession would look even less large in magnitude if it were extended to include the 1980 slump.
So both he and Mr. Gibson still conclude: The nation has experienced a bad postwar contraction, but not the worst.
How this recession compares with past recessions Percentage of Percentage change Percentage working age in industrial change of Recession population employed production real GNP 1948-49 54.1 -10 -1.4 1953-54 53.4 -9 -2.6 1957-58 53.9 -13 -2.7 1960-61 53.9 -9 -0.1 1969-70 55.1 -7 -0.1 1973-75 55.0 -15 -4.9 1980 58.1 -9 -2.1 1981-82 56.4 -12 -2.2 Source: First Albany Corporation