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Familiar Ground: Recessions not new to U.S., but this one might be one of the worst, experts say
AP File Photo
Unemployed auto and steel workers marched at 4 a.m. in front of the White House in the "Wake Up, Mr. President" protest in August 1982.
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Published: March 9, 2009
WASHINGTON
Factory jobs disappeared. Inflation soared. Unemployment climbed to alarming levels. The hungry lined up at soup kitchens.
It wasn't the Great Depression. It was the 1981-82 recession, widely considered America's worst since the Depression.
That painful time during Ronald Reagan's presidency is a grim reminder of how bad things can get. Yet the current recession could slice deeper into the U.S. economy.
If it lasts into April -- as it almost surely will -- this one will go on record as the longest in the postwar era. The 1981-82 and 1973-75 recessions each lasted 16 months.
Unemployment hasn't reached 1982 levels and the gross domestic product hasn't fallen quite as far. But the hurt from this recession is spread more widely and uncertainty about the country's economic health is worse today than it was in 1982.
Back then, if someone asked if the nation was about to experience something as bad as the Great Depression, the answer was, "Quite clearly, ‘No,'" said Murray Weidenbaum, the chairman of the Council of Economic Advisers in the Reagan White House.
"You don't have that certainty today," he said. "It's not only that the downturn is sharp and widespread, but a lot of people worry that it's going to be a long-lasting, substantial downturn."
For months, headlines have compared this recession with the one that began in July 1981 and ended in November 1982.
□ In January, reports showed 207,000 manufacturing jobs vanished in the biggest one-month drop since October 1982.
□ Major automakers' U.S. sales extended their deep slump in February, putting the industry on track for its worst sales month in more than 27 years.
□ Struggling homebuilders have just completed the worst year for new home sales since 1982.
□ There are 12.5 million people out of work today, topping the number of the unemployed in 1982.
"I think most people think it is worse than 1982," said John Steele Gordon, a financial historian. "I don't think many people think it will be 1932 again. Let us pray. But it's probably going to be the worst postwar recession, certainly."
The 1982 downturn was driven primarily by the desire to rid the economy of inflation. To battle a 10-year bout of high inflation, then-Federal Reserve Chairman Paul Volcker, now an economic adviser to President Obama, pushed interest rates up to levels not seen since the Civil War. The approach tamed inflation, but not without suffering.
Hardest hit was the industrial Midwest; the Pacific Northwest, where the logging industry lagged from construction declines; and some states in the South, where the recession hit late.
Frustrated workers fled to the Sunbelt to find work. In Michigan, which led the nation in unemployed workers, newspapers offered idled auto workers free "job wanted" ads in the classified section. Mortgages carried double-digit interest rates. When the 1982 recession ended, the national unemployment rate had hit 10.8 percent.
Just like today, that recession led to political finger-pointing.
When the government reported a 10.1 percent unemployment rate for September 1982, organized labor rallied across the street from the White House. A few protesters chained themselves to an entrance at the Labor Department. The U.S. Chamber of Commerce called it a national tragedy and blamed Democrats. Democrats called it a national tragedy and blamed Reagan.
Even months after the recession officially ended, Reagan was greeted in Pittsburgh by signs that said: "We want jobs, Mr. Hoover" and "Reagan says his economic program is working -- are you?" President Herbert Hoover's term is forever linked in history with the Great Depression.
Like Reagan did then, Obama is dishing up hope. Trouble is, people can't visualize any reward they might get from making it through this recession, said William Niskanen, an economic adviser to Reagan.
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