Crash Comparisons: Job Losses & Dow Jones

House Speaker Nancy Pelosi recently posted an alarming chart of job losses that has been making the rounds.

Job Losses in Recessions

What jumps out to me when I look at her chart is the fact that the y-axis shows raw number of jobs rather than a percentage loss, and therefore fails to account for the increased size of the job pool from one recession to the next. To give you an idea of how misleading this can be, just check out a chart comparing the current Dow Jones crash to the Great Depression, but in raw points rather than as a percentage:

Dow Jones Crashes

A reader requested that I post a graph similar to the Dow Jones percentage decline crash chart I have published on here a few times, but showing job losses as a percentage loss from the peak. Coincidentally, Calculated Risk posted that exact chart a few days ago. Here it is:

Job Losses in Post-WWII Recessions

The current rate of job losses is bad, but it doesn’t look quite as alarming when you compare it in a scaled chart.

While we’re at it, here’s an updated edition of the Dow Jones crash chart:

Dow Jones Crashes

  

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

55 comments:

  1. 1
    Gottalaugh says:

    Remember, if you torture numbers long enough they will confess anything

    Rate this comment: Thumb up 0

  2. 2
    Emma Anne says:

    The job losses don’t look so bad in that chart, but the direction of the line is pretty scary.

    Rate this comment: Thumb up 0

  3. 3
    dls says:

    Thanks Tim,

    Unfortunately, only mature thinking people care, let alone understand, about such pesky facts as these. Of course, since modern Liberal ‘thought’ is based on immaturity, most folks in the CSA don’t care about inconvenient facts, they just want the governement to think for them.

    Rate this comment: Thumb up 0

  4. 4
    Vicki says:

    The advantage of Pelosi’s chart is that it only shows recent recessions, which are the ones most people have lived through as adults and remember. It helps you understand “this is worse than you remember.” Also – If you look at just those three lines in The Tim’s chart – it isn’t all that different. Some difference, yes, but by just looking at recent recessions, you minimize the scaling problem. Obviously, The Tim’s chart is the correct one. I’m just saying that Pelosi’s isn’t as misleading as the current / depression comparison chart.

    Rate this comment: Thumb up 0

  5. 5
    anony says:

    What scares me it the length of the job losses in the recent recessions in the % from peak graph. It looks like in 1990 and 2001 it took about twice as long as the others to recover jobs. We appear to be approaching the depth of the losses in long ago recessions. If we get anywhere close to the duration of the 1990 and 2001 this recession would dwarf all the others.

    Rate this comment: Thumb up 0

  6. 6
    David Losh says:

    I would like to see a chart showing the run up in the stock markets before the crashes.

    The way it looks to me we have had twenty years of unprecedented economic growth. Technology changed busines, we all had to have it, we used it to increase our respective business models, and now there seems to be technology everywhere.

    A contraction makes sense to me until the global economies are redirected.

    Rate this comment: Thumb up 0

  7. 7
    old ballard says:

    Hey dls,

    Why do “mature thinking people” such as yourself need to resort to the “immaturity” of childish insults?

    Are we all suppose to be shocked that Democratics are no better then Republicans when it come to the true. I never made that assumption and I’m a liberal.

    Hey, I have a proposal for you. Next time you can say something about liberal’s mothers violent love life. Then we’ll all know that your the most mature student in class.

    P.S. Stay away from the generalizations it’s safer. When you show your contempt for others your telling the world more about yourself than you want them to know.

    Rate this comment: Thumb up 0

  8. 8
    Ray Pepper says:

    Here is the chart I wanna see go up. I’m loaded to the gills at 1.11

    March 2.5 calls priced in.

    http://www.google.com/finance?client=ob&q=NYSE:ABK

    Rate this comment: Thumb up 0

  9. 9
    Charles Dean says:

    Yeah, when I saw that first chart, I saw that it wasn’t in percentages, but rather actual job numbers. I like having the percentages out there.

    I think the thing that is disconcerting about it is how quickly the bottoms happened on all but the 2001 recession.

    Could be argued that either the 2001 job recovery took longer because of fed intervention, or that it should’ve been more drastic.

    Rate this comment: Thumb up 0

  10. 10
    98115_Renter says:

    RE: dls @ 2

    Grow up, DLS.

    Rate this comment: Thumb up 0

  11. 11
    Kary L. Krismer says:

    2001 was affected by outside events–9/11. We were heading down before that, but 9/11 affected it greatly.

    As to the first chart, what a shock that something Nancy Pelosi did would be biased!

    Rate this comment: Thumb up 0

  12. 12
    98115_Renter says:

    Everybody loves to paint Nancy Pelosi with such a negative brush, largely based on republican spin (which democrats rarely do a good job of defusing).

    Nancy Pelosi’s my girl. Y’all should stop listening to Rush and realize that she is a terrific lawmaker, and a historic figure (first woman SOTH). It’s more or less the same type of doo doo the right smears all over Hillary.

    Rate this comment: Thumb up 0

  13. 13
    cheapseats says:

    I loathe Limbaugh/Pelosi equally. Being the first at something is great and all but you really need to do something with it eventually. Since she has been at the helm she has done squat…

    Rate this comment: Thumb up 0

  14. 14
    Interloper says:

    RE: Vicki @ 4

    It’s a really good point that we don’t remember what a typical recession feels like. We’ve had remarkably good luck for a quarter century with few and short recessions.

    Because it feels deeper that the recessions we recall, we wonder if it’s a Depression. (jury’s still not out on that one, according to the stock chart)

    Rate this comment: Thumb up 0

  15. 15
    The Tim says:

    RE: dls @ 3, 98115_Renter @ 12

    I am not trying to start a political flamewar here, just pointing out that the Pelosi chart is misleading in the data that was selected and the way it was presented.

    I do find it ironic that a politician who has spent the last eight years accusing the other side of resorting to the “politics of fear” is now putting out alarmist charts like this and making claims such as “every month that we do not have an economic recovery package, 500 million Americans lose their jobs.”

    Politicians of all stripes have no problems resorting to fear and alarmism to push their agendas. Big surprise.

    Rate this comment: Thumb up 0

  16. 16
    Chuck Ponzi says:

    98115_Renter

    What?

    Nancy Pelosi has a consistent track record of ignoring her constituents on a personal moral crusade. You live in Washington, so it’s easy to say that what she does is fine because it doesn’t affect you.

    I’ll tell you what. When you live in her district, we’ll treat your comments about Pelosi as worthwhile. Trust me, if you lived here, you wouldn’t feel so satisfied with her.

    Chuck Ponzi

    Rate this comment: Thumb up 0

  17. 17
    Teacher_Greg says:

    This is for the Tim and others in the know: how difficult is it to compare the data when the methodology for calculating unemployment rates/data has changed over time?

    Rate this comment: Thumb up 0

  18. 18
    David McManus says:

    By cheapseats @ 13:

    Being the first at something is great and all but you really need to do something with it eventually. Since she has been at the helm she has done squat…

    Hmmmmmmm. Interesting.

    Rate this comment: Thumb up 0

  19. 19
    old ballard says:

    True enough, it maybe the “politics of fear,” but that doesn’t make Pelosi’s statements any less correct. People really should be afraid. The damage done to our economy over the last thrity years and the resulting crash will make 911 and the resulting reccession look like an economic boom.

    Check this out from the Economist:

    http://www.economist.com/finance/displaystory.cfm?story_id=13062194

    You know that by the time it appears in print publication it’s all ready baked in the cake. We’re all playing with fire and we’re all going to get burned.

    Rate this comment: Thumb up 0

  20. 20
    98115_Renter says:

    RE: The Tim @ 15

    I agree about the alarmism, but you must admit Tim that the Dow chart shows that our curent market is second only the Great Depression, or am I wrong? I’m sure there are many ways to interpret the chart, but based solely on where we are now in comparison to other recessions, this one looks pretty dire.

    Rate this comment: Thumb up 0

  21. 21
    WestSideBilly says:

    RE: Teacher_Greg @ 17

    There are articles floating around that attempt to compare the current U-3/U-6 unemployment statistics to past metrics. It’s especially difficult to compare with the great depression because of changes in workforce demographics (notably that more women work today).

    http://blogs.wsj.com/economics/2009/02/06/the-other-unemployment-rate-139/

    http://www.opednews.com/populum/diarypage.php?did=12004

    YMMV.

    Rate this comment: Thumb up 0

  22. 22
    DaveyDave says:

    A really good argument can be made that unemployment has now pushed the housing ‘crisis’ from the top spot of economic concern. Most say that over leveraging is the root cause of this mess and that’s probably true. You could trace the causes further back than that if you had a mind to, such as basic human greed — American Style. Maybe there’s a tv show in there somewhere…

    But we’re beyond that now in terms or policy priority. If someone is facing foreclosure, but still has a job, then there’s an economic solution out there for them somewhere — like a cheap rental. But if you do not have a job then you’re looking at a whole different magnitude of problem — like trying to feed your family.

    Btw, here’s a good Michael Lewis Op-Ed piece from the NYTimes about the stock market crash if you’re interested:
    http://www.nytimes.com/2009/01/04/opinion/04lewiseinhorn.html?pagewanted=1&_r=2

    Rate this comment: Thumb up 0

  23. 23
    EconE says:

    By Teacher_Greg @ 17:

    This is for the Tim and others in the know: how difficult is it to compare the data when the methodology for calculating unemployment rates/data has changed over time?

    I was wondering the same thing.

    Rate this comment: Thumb up 0

  24. 24
  25. 25
    The Tim says:

    RE: 98115_Renter @ 20 – My beef is that politicians (on all sides) have been sitting on their hands for the last twenty years while personal, corporate, and government debt levels steadily grew to totally unsustainable levels. They are happy to wait until it is politically expedient to their cause before they bother sounding the alarm. But again, I don’t really want to turn this thread into a political flamewar. If we want to divert to a purely political discussion, somebody go start a forum thread.

    Rate this comment: Thumb up 0

  26. 26
    TheMightyQuinn says:

    By cheapseats @ 13:

    Since she has been at the helm she has done squat…

    What are you talking about? Pelosi and the gang took over in 2006. From the look of those charts, I she’s she’s done quite a bit to the country.

    Rate this comment: Thumb up 0

  27. 27
    Snigliastic says:

    TheMightyQuinn-
    Wow. you sound just like the lady I talked to who blamed Democrats for her stock portfolio losing 40% since 2006 elections. The lack of comprehension was amazing. And what’s even scarier is that a lot of people share your opinion. Revolting.

    Rate this comment: Thumb up 0

  28. 28
    The Tim says:

    RE: 98115_Renter @ 20, TheMightyQuinn @ 26, Snigliastic @ 27 – Seriously guys and gals, let’s take this conversation to the forums. Here, I’ve created a thread just for you: Economic Mess Blamefest

    Rate this comment: Thumb up 0

  29. 29
    jon says:

    Nice article at http://globaleconomicanalysis.blogspot.com/2009/02/wealth-does-not-pass-three-generations.html about the typical cycle that families that become wealthy go through. Every three generations they have to start over, and every three generations the country sees a Depression-sized reset.

    Rate this comment: Thumb up 0

  30. 30
    WaileaKid says:

    Emma Anne @2 made a very good point hat some how got lost in the political discussion above. It’s not the current %age losses but the rate of job loss that is scary. By the time we are a year into the job losses, most other recessions had started the healing process. But the current recession is only accelerating. That’s what is scary about the chart that Nancy posted and the one Tim posted.

    Rate this comment: Thumb up 0

  31. 31
    DaveyDave says:

    By Ray Pepper @ 8:

    Here is the chart I wanna see go up. I’m loaded to the gills at 1.11

    March 2.5 calls priced in.

    http://www.google.com/finance?client=ob&q=NYSE:ABK

    Ray! You’re a gambler! -1900% ROE last quarter? It’s a risky equity environment out there for this sector. Unless you know something… Hmmm. I hope you make a fortune.
    ps – I wear an XL

    Rate this comment: Thumb up 0

  32. 32
    98115_Renter says:

    RE: The Tim @ 24

    So, it is at crisis proportions, or isn’t it?

    Rate this comment: Thumb up 0

  33. 33
    Dewey says:

    Right now on “To the Point” on KUOW the topic is about home ownership and whats wrong with renting?

    Rate this comment: Thumb up 0

  34. 34
    deejayoh says:

    I do think it’s interesting that the typical cycle for an employment downturn is about 18 months. So if historical patterns hold we should see a turn around this year.

    Not that I am predicting this – perhaps it will go on another year but at some point it will end and people will still be talking about how bad things are. I see that people have a tendency to project forward whatever the current trend is forever – on both the upside and the downside.

    There is a reason they call it the “economic cycle”.

    Rate this comment: Thumb up 0

  35. 35
    Jillayne says:

    Thanks Dewey. Tuning in now.
    J.

    Rate this comment: Thumb up 0

  36. 36
    DrShort says:

    With regard to the stimulus bill, it looks like the $15,000 tax credit for buying a home is being removed…

    “Working to accommodate the new, lower overall limit of the bill, negotiators effectively wiped out a Senate-passed provision for a new $15,000 tax credit to defray the cost of buying a home, these officials said. ”

    http://finance.yahoo.com/news/Stimulus-pared-to-789-billion-apf-14325858.html;_ylt=Atrsh.bJ3wY7OXggLtjuaX27YWsA

    Rate this comment: Thumb up 0

  37. 37
    98115_Renter says:

    RE: DrShort @ 36

    PTL

    Rate this comment: Thumb up 0

  38. 38
    deejayoh says:

    link is there for me…

    This is not surprising. The house version of the bill was much stronger than the senate version.

    Rate this comment: Thumb up 0

  39. 39
    The Tim says:

    RE: DrShort @ 36 – I was typing in the post about that very news bit just as you posted that comment. Spent a little extra time to find another source to verify, since I was so surprised about the news.

    Rate this comment: Thumb up 0

  40. 40
    TheMightyQuinn says:

    By Snigliastic @ 27:

    TheMightyQuinn-
    Wow. you sound just like the lady I talked to who blamed Democrats for her stock portfolio losing 40% since 2006 elections. The lack of comprehension was amazing. And what’s even scarier is that a lot of people share your opinion. Revolting.

    Relax, it was a joke. However I do blame the Democrats for the spike in gas prices almost immediately after they took control. Oh, and the dot com crash and 911 were Bush’s fault. :)

    Rate this comment: Thumb up 0

  41. 41
    98115_Renter says:

    RE: 98115_Renter @ 37

    PTL = Praise the Lord.

    Rate this comment: Thumb up 0

  42. 42
    Snigliastic says:

    Quinn.
    Ok. Good joke. You got me. But you never know. some people are so stupid they actually believe what you say.

    Rate this comment: Thumb up 0

  43. 43
    Mikal says:

    RE: The Tim @ 24
    Your chart doesn’t factor in the millions upon millions of females that have entered the work force that didn’t eighty years ago. Find me a chart for that. My grandfather believed that women in the work force made it even harder for men to have jobs that would support a family. I’m not saying he is right or wrong, but no one here has really factored that changing of the employment statistics. Or did I miss something?

    Rate this comment: Thumb up 0

  44. 44
    vermillionsky says:

    RE: Mikal @ 43

    Not quite a chart, but an interesting read:

    “The Two-Income Trap”

    One thing to think about is how a rise in the number of two-income families might have played a role in increasing housing prices.

    Rate this comment: Thumb up 0

  45. 45
    vermillionsky says:

    oh, I forgot to mention the point of linking that book. The authors assert that we have reached a point where married families need to have two incomes to survive.. that the prevalence of two-income families has driven costs up (such as housing) so that families need both incomes to break even. So, unemployment (first or second income in the family) makes it hard for any family to make it, not just traditional family structures.

    Rate this comment: Thumb up 0

  46. 46
    Kary L. Krismer says:

    By vermillionsky @ 44:

    One thing to think about is how a rise in the number of two-income families might have played a role in increasing housing prices.

    I mention that all the time as to why historical pricing isn’t that relevant if you go back too far. When you have a second income, a lot of that can be spent on discretionary items, and housing becomes such an item, forcing prices up. That probably explains why in the 50s most houses had only one bathroom. I think they knew how to have more than one toilet in a house, but people didn’t want to spend money on such a thing. Add in a second income, and suddenly they do.

    Rate this comment: Thumb up 0

  47. 47
    Ray Pepper says:

    RE: DaveyDave @ 31

    I’m running out of shirts and the Show hasn’t started. I have alot of size Mediums.

    Dave I watch odd options activity. The entire market is a gamble right now… But it appears I’m not the only one who is noticing. It ran from 1-10.00 about 7 months ago…I’m 26k long at 1.11

    http://www.cnbc.com/id/29057006?__source=RSS*blog*&par=RSS

    Rate this comment: Thumb up 0

  48. 48
    DaveyDave says:

    By Ray Pepper @ 47:

    RE: DaveyDave @ 31

    I’m running out of shirts and the Show hasn’t started. I have alot of size Mediums.

    Well, I do about 3 situps a day, but that’s just to get out of bed. I’ll see what I can do to get down to a medium… I hope the investment works out for you.

    Rate this comment: Thumb up 0

  49. 49
    Randal J says:

    One thing I was wondering about – when you measure declines off peak values (percentages or values), without more information, you don’t really know what you have.

    If there were a big runup or bubble preceeding the decline, you might say that one could Rip Van Winkle one’s way through it and not feel a thing. Whereas if that same decline came off of the norm, Rip might just swallow a bottle of sleeping pills when he realizes what’s happened.

    So, while decline from peak seems like a good seismograph of how severely the economy is “lurching”, decline relative to the norm seems to me to be a better barometer of the intrinsic economy.

    And if you know you are going through a transition, you might behave differently that if the fundamentals are truly f*@#ed.

    Thoughts?

    Rate this comment: Thumb up 0

  50. 50
    silver9 says:

    Job losses are important to us because we all need a job but jobs are a lagging indicator.

    Recessions are periodic slow downs of the normal business cycle.
    Depressions are discontinuous breaks in the normal business cycle.

    The problem here is not a slow down in spending. The problem is a threat to the financial system as a whole. The problem now is a titanic bubble of bad debt that was created and now needs to dissipate. This is not a bad recession – it is very much different.

    Just last night on the News Hour, Krugman and an economist from Harvard and some Wall Street guy were causally discussing the fact that our largest banks are probably insolvent and will need another $2T to restore them… There was not debate or questioning this assessment.

    Talking about jobs and stimulus plans is fine but its kind of missing the giant elephant in the room — how will we unwind the credit default swaps and mortgage-backed securities we created since 2001.

    The charts are interesting but they dont do much to illuminate the problem. This is the biggest financial problem in a century and it is global.

    Rate this comment: Thumb up 0

  51. 51
    Kary L. Krismer says:

    I wrote a piece over in P-I land about the changing nature of bankruptcy debtors. A lot more people that own property than in prior years, some multiple properties.

    Anyway, looking at the records for a lot of the ones that filed, they lived off the appreciation of their home. Just pulling some numbers out of the air, a fact pattern like this would be typical:

    1. Bought house in 2003 for $320,000.
    2. Encumbered house in 2004 for $350,000.
    3. Encumbered house in 2005 for $390,000.
    4. Encumbers house in 2007 for $420,000.
    5. Assessed value in 2008, $370,000.

    Now the percentage of people that file Chapter 7 is quite low, but that’s a lot of spending that was based on houses appreciating.

    What’s interesting is it’s not the zero downs necessarily getting into trouble. It’s the people with spending problems on things other than housing. Although there are a few houses over $500,000, but that’s rare.

    Rate this comment: Thumb up 0

  52. 52
    Jonness says:

    Awesome charts!

    I’m trying to brace for the recession and understand how the massive stimulus is going to boost the economy. Does anyone know if I can buy stock with food stamps? If not, one way of getting out of this mess would be a massive food stamp for stock program. You could survive on Top Raman and use the surplus food stamps to get rich in the process. This is going to work!

    Rate this comment: Thumb up 0

  53. 53
    tomtom says:

    RE: Kary L. Krismer @ 51
    In poking around public property records, I’ve found a number of ‘investors’ walking away from multiple properties. A couple of extremes:

    1. One ‘investor’ has at least *12* homes in Greenlake ish and West Seattle areas going NTS within the year. Looks like they bought them recently, rented them out, and are walking away with the decline. A number of these are above $500,000.

    2. Another ‘investor’ has three properties NTS, where one was purchased a while ago for $120k, but now owes $340k in foreclosure. Rental property as a ATM machine.

    I’ll guess that ‘investors’ are the first to walk away with declining property values. I wonder what percentage of local current foreclosures are not owner occupied. I saw a news item from almost a year ago saying the national average was 1 in 3.

    Rate this comment: Thumb up 0

  54. 54
    Kary L. Krismer says:

    In my blog piece I pointed out that not only were there more property owners in bankruptcy, but also more people that owned multiple properties. Alan Wenokur, a bankruptcy attorney I know, responded confirming he’s seeing more multiple property owners in his practice too.

    In the distant past I’d seen that with people moving here from other states. They’d owned multiple properties and ended up upside down. What’s surprising about the local situation is I think the rental market for houses is still fairly decent, but maybe they’re trying to get too much and end up with nothing.

    Rate this comment: Thumb up 0

  55. 55
    Kary L. Krismer says:

    By Jonness @ 52:

    Awesome charts!

    I’m trying to brace for the recession and understand how the massive stimulus is going to boost the economy. Does anyone know if I can buy stock with food stamps? If not, one way of getting out of this mess would be a massive food stamp for stock program. You could survive on Top Raman and use the surplus food stamps to get rich in the process. This is going to work!

    I think you’re confusing the health of the stock market with the health of the economy. One reflects the other, but you’re not going to improve the economy much by pumping up the stock market. You could make a similar analysis with real estate, but the difference is with real estate the health of the market affects the banks, and the banks’ health effects the economy.

    Rate this comment: Thumb up 0

Leave a Reply

Use your email address to sign up with Gravatar for a custom avatar.
Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Please read the rules before posting a comment.