The views expressed are those of the author(s) and do not necessarily reflect official positions of the Federal Reserve Bank of St. Louis or the Federal Reserve System. We have escaped a repeat of the Depression, but we appear to have lost the opportunity for significant financial reform. Timing and severity. The rate for the Great Depression was produced by G. H. Moore for the National Industrial Conference Board (https://fred.stlouisfed.org/series/M0892AUSM156SNBR). From February to March, the S&P 500 fell some 20 percent. 15645 Issued in January 2010, Revised in December 2011 NBER Program(s):Development of the American Economy, Economic Fluctuations and Growth, Monetary Economics This paper discusses parallels between our current recession and the Great Depression for the intelligent general public. On March 9, 2009, the Dow hit its recession bottom. 2 Figure 1 plots the Blue Chip consensus forecasts for 2020:Q2-2021:Q4 (as of July 10) and the Survey of Professional Forecasters forecast for 2020:Q2-202:Q2 (as of May 15, 2020). By contrast, consensus forecasts predict that the U.S. economy will expand in the second half of 2020 and into 2021 but that output will remain below the 2019 peak for at least several quarters. 3 Data are from FRED®, Federal Reserve Bank of St. Louis 4 Figure 2 assigns quarterly forecasts to the third month of each quarter. Although IP continued to fall for several quarters during the Depression, forecasters currently expect that IP will rise in coming months. Comparing the 2020 recession with the Great Depression is also fraught with measurement difficulties, but some rough comparisons based on various measures of economic activity are possible. The 2020 recession is expected to be the worst recession since the Great Depression. Finally, Figure 5 plots the S&P 500 (Standard and Poor's stock price index). The virus and the public's response to it will likely make that determination. The data are set equal to 100 in the cycle peak quarters (the third quarter of 1929 and fourth quarter of 2019). Chicago: University of Chicago Press, 1986, pp. The Great Recession and the Great Depression, The 2020 Martin Feldstein Lecture: Journey Across a Century of Women, Summer Institute 2020 Methods Lectures: Differential Privacy for Economists, The Bulletin on Retirement and Disability, Productivity, Innovation, and Entrepreneurship, Conference on Econometrics and Mathematical Economics, Conference on Research in Income and Wealth, Improving Health Outcomes for an Aging Population, Measuring the Clinical and Economic Outcomes Associated with Delivery Systems, Retirement and Disability Research Center, The Roybal Center for Behavior Change in Health, Training Program in Aging and Health Economics, Transportation Economics in the 21st Century. https://www.history.com/topics/great-depression/great-depression-history Consequently, we use the value in December 1929 (set equal to 100) as the starting point, rather than the value at the business cycle peak in August 1929. This was worse than any other bear market since the Great Depression of 1929. The Great Depression began in the United States as an ordinary recession in the summer of 1929. It stresses the role of economic models and ideas in public policy and argues that gold-standard mentality still holds sway today. Peter Temin, 2010. from the Research Division of the St. Louis Fed. Stock prices peaked in early October 1929 then famously crashed, plunging some 30 percent over the first three months of the Great Depression. The 2020 contraction might turn out to be the sharpest, but also the shortest, in modern times and perhaps of all time in the United States. Although official estimates of GDP begin in 1947, quarterly estimates of GNP (i.e., gross national product) are available for the Depression and earlier years.1 Figure 1 plots the real GNP series for the Depression alongside the path of real GDP from the fourth quarter of 2019 through the first two quarters of 2020. NBER Working Paper No. A more consistently measured, but narrower, indicator of economic activity is the Index of Industrial Production (IP).3 The index fell sharply during the first two months of the 2020 recession, as shown in Figure 2, but then began to rise. The cumulative declines in IP during the first four months of the Depression and the 2020 recession were similar. As of April 2020, it was already worse than the 2008 recession in its initial ferocity. Economic Growth . Moreover, the fall in real GDP during the second quarter of 2020 exceeded the largest one-quarter real GNP contraction during the Depression. The Business Cycle Dating Committee of the National Bureau of Economic Research determined that on a quarterly basis economic activity peaked in the fourth quarter of 2019; though on a monthly basis, the peak occurred in February 2020 (https://www.nber.org/cycles/main.html). By 1932, stock prices were down nearly 85 percent from their August 1929 level. (https://fred.stlouisfed.org/series/INDPRO). Although the CPI fell during the first two months of the 2020 recession, it has since recovered to near its pre-recession level and is forecast to gradually rise. © 2020, Federal Reserve Bank of St. Louis. 5 The unemployment rate for the 2020 recession is the Bureau of Labor Statistics U-3 measure (https://fred.stlouisfed.org/series/UNRATE). Here are the key statistics in economic growth, unemployment, retail sales, and the stock market. Rather than telling … Balke, Nathan and Gordon, Robert J. By almost any measure, the 2020 recession began with sharp declines in economic activity, employment, and equity prices that rivaled or exceeded the initial declines of the Great Depression. The COVID-19-induced U.S. recession has been frequently compared with past recessions, including the Great Depression of the 1930s. The economic impact of the Great Depression was enormous, including both extreme human suffering and profound changes in economic policy. Stock prices also fell sharply in the early days of the 2020 recession. The Commerce Department estimates that inflation-adjusted (i.e., "real") gross domestic product (GDP) fell at annual rates of 5.0 percent in the first quarter of 2020 and 32.9 percent in the second quarter. Stay current with brief essays, scholarly articles, data news, and other information about the economy In addition to large declines in economic activity and employment, the price level also fell considerably during the Great Depression, as shown in Figure 4. The unemployment rate increased sharply in the 2020 recession, from 3.5 percent in February to nearly 15 percent in April before falling back to 11.1 percent in June. The Great Depression was likely the largest and longest slump in economic activity in U.S. history, though records for the eighteenth and nineteenth centuries are sketchy. "Comparing the COVID-19 Recession with the Great Depression,". How Recessions Have Affected Household Net Worth, 1990-2017: Uneven Experiences by Wealth Quantile, Other Research Division Resources on COVID-19, Comparing the COVID-19 Recession with the Great Depression, https://fred.stlouisfed.org/series/INDPRO, https://fred.stlouisfed.org/series/UNRATE, https://fred.stlouisfed.org/series/M0892AUSM156SNBR. "Data Appendix," in Robert J. Gordon, ed., The American Business Cycle, Continuity and Change. The Great Recession and the Great Depression Peter Temin. While there are accounts of both episodes, no one has yet attempted a sustained comparative analysis. 7 However, if persons employed in government relief jobs are included, the rate fell below 10 percent in 1936.
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