Recessions and rhetoric.

• Author: Kane, Tim D.

Regardless of your political sentiments during the last election, one thing was clear. All three presidential candidates were keenly sensitive to the misery being inflicted on the electorate by the recession and agreed that the three most important issues were jobs, jobs, and more jobs. During the campaign, the recession received a blizzard of media attention and became an important pressure point used against incumbents, but was it really any different or more severe than other's Americans have experienced during the last two decades? The preliminary figures suggest that, while it was different, it certainly was no worse (and, in fact, was milder than some others).

To an economist, the single most important criterion for designating recession is the aggregate level of economic activity, the Gross Domestic Product. Absolute declines in the inflation-adjusted GDP are the tea leaves read by the gurus at the National Bureau of Economic Research in order to certify a recession officially. The average person probably applies a more pragmatic yardstick--how the economy's problems are affecting him or her as an individual. Examples of these individual experiences would be workers laid off, new graduates unable to find work, people forced to accept reduced hours on the job, and perhaps even personal bankruptcy. The GDP might measure the temperature of the over-all economy, but it is unemployment and declining personal incomes that reflect the vital signs of human beings under severe economic stress.

According to the Commerce Department, prior to the recent downturn, the U.S. officially experienced recessions in 1969-70, 1975-76, 1980, and 1981-82. When GDP is the criterion, the recent recession appears to have been relatively mild. There only were three quarterly declines in GDP, compared to four in 1974-75 and again in 1981-82. In addition to differences in duration, recessions vary considerably in magnitude. In total, the decline in economic activity from peak to trough in the 1990s was $80,000,000,000, roughly equivalent to that experienced in 1974-75. During the previous two recessions, however, lost output averaged $105,000,000,000 measured in 1987 dollars. Only the recession of 1969-70 was milder at $28,000,000,000. Of course, all changes are relative and, when viewed in that light, the recent recession produced a measly 1.6% loss in GDP--about half the size of the relative losses in 1974-75, 1980, and 1981-82.

Shifting perspective from the...