Everyone has their own candidate for ‘scariest graph of recent economic news.’ Here’s mine.
It comes from the excellent recent McKinsey Global Institute report “An economy that works: Job creation and America’s future.” The MGI team had the clever idea to plot how quickly jobs came back as the economy rebounded after each post-war recession. To be more precise, for each recession-and-recovery cycle they graphed how many months it took for the total # of jobs to get back to its pre-recession peak after GDP had come back to its pre-recession peak. There’s always a lag – jobs come back more slowly than GPD does — but MGI wanted to see if that lag had been growing or shrinking over the years.
It’s been growing. A lot. Here’s the graph:
The cycles from 1948 to 1981 are remarkably consistent — it takes about half a year for employment to come back. And then things started to change; the employment recovery following the 1990 recession took almost twice as long as any previous one, and the 2001 time lag was over twice as long again. Given the depth and severity of the Great Recession and the achingly slow pace of job creation since its end, everyone expects the 2008 column on this graph to be by far the tallest one. In fact, there’s a lot of concern that we might not even get back to pre-recession employment levels before the next recession hits.
I don’t think it’s any coincidence that the lags get longer and longer as we head ever-deeper into the digital era. Recessions force companies to take a hard look at themselves and learn what they can do without. As computers get more and more powerful and capable businesses find that they can do without as many people. They then find that even when growth resumes they don’t need to resume hiring at anything like the pre-recession pace, since each worker they have is so much more productive and capable thanks to technology. So I don’t know how long the column for the 2008 recession is going to be on the above graphs, but something tells me it’s going to loom over the other ones like a skyscraper over a residential neighborhood.
What’s your scariest graph? And which ones, if any, contain good news? Leave a comment, please, and let us know.