The current recession in the US has become the second worst in the last half-century and is close to surpassing the severe 1973-75 downturn, according to the Index of Coincident Indicators, based on government data and compiled each month by the Conference Board, a private organization.
Unlike the more widely followed Index of Leading Indicators, which is supposed to help forecast changes in the economy, the coincident index is aimed at simply recording how the economy is doing now.
The figure for March, released last week, showed a decline of 5.6% from the high set in November 2007, the month before the recession began, according to the Massachusetts, US-based National Bureau of Economic Research (NBER). The decline in the 1970s recession was 6%, a figure that is likely to be eclipsed within a few months.
The index is based on four elements, covering different aspects of economic activity. The strongest performance in this cycle is in the area of personal income, excluding transfer payments, and adjusted for inflation.
The sharpest fall so far in the current recession was a decline of 2.4% through February, and the indicator rose a little in March. If that proves to be the worst reading for this recession, it will be a smaller decline than in the downturns of 1990-91, or in the brief 1980 recession, and less than half the decline in the 1973-75 recession.
That performance may be misleading, however. Personal income includes the cost of benefits, so rising healthcare expenses for employees count in that number. The decline would be larger if it were based strictly on wage and salary receipts. The two areas in which this is already the worst recession since 1960 are employment and industrial production. The number of jobs in the US has fallen by 3.9%, exceeding the 3.2% decline in the 1981-82 recession.
The 15.4% fall in industrial production, while worse than in previous recessions, is better than in some countries. The worldwide recession has slashed both production and international trade, and the impact is being felt most in export-driven economies in Asia.
The fourth category used in the coincident indicators is manufacturing and trade sales, a broad picture of total transactions in the economy. Adjusted for inflation, that has fallen 10.8% since the peak, a bit more than the decline in 1981-82 but not yet close to the 14.8% decline in the 1970s. This recession is also bidding to be the longest in recent history. If it ends in May— which seems unlikely—it will have lasted 16 months, tying it with the 1973-75 and 1981-82 downturns as the longest since World War II.
The Index of Coincident Indicators did not exist in the 1930s. But there is no doubt that the declines in the Great Depression would have been far greater than anything experienced since.
It also lasted much longer. As measured by the NBER, there were actually two recessions during the period we now remember as the Great Depression—1929-33 and 1937-38 —separated by a recovery that did not come close to restoring the economy to its pre-Depression size. That first downturn lasted 43 months, nearly three times as long as this recession has lasted until now.
©2009/THE NEW YORK TIMES