A short, shallow recession

Chris Farrell May 15, 2008

A short, shallow recession

Chris Farrell May 15, 2008


Bob Moon: Investors get a look at the latest numbers on unemployment claims today. Economists are generally forecasting a modest rise, but enough to call it a recession? That’s debatable — except, perhaps, in particular parts of the economy where what you call the current downturn is beside the point. Remember that old saying: A recession is when you lose your job, a depression’s when I lose mine.

Our economics correspondent, Chris Farrell, has been taking a closer look at specific trends. Good morning, Chris.

Chris Farrell: Good morning.

Moon: You know, the last job report gave us something of a relief on the job front. But we still had 20,000 jobs lost and with Wall Street and the rest of us wondering if this is going to be a short and shallow recession or a deep and vicious one, what do these numbers tell us?

Farrell: What the numbers so far tell us is that the downturn will be short and shallow, assuming that we continue to lose jobs in the sort of 75,000 to the 100,000 range. That typically defines a short, shallow recession. But, you know, it’s not just the raw numbers, Bob. It’s who is getting laid off that can have a big impact. But just to give you some numbers here: If you look at less than a high school diploma — for example, manufacturing and construction — the unemployment rate went from 7.6 percent to 7.8 percent. Now, let me give you one more number.

Moon: I’m following this.

Farrell: Bachelor’s degree or higher, same time frame — December 2007 unemployment rate 2.2 percent, April 2.1 percent.

Moon: And what’s the significance of that?

Farrell: Well, the significance is that that’s where most of the job growth has really occurred. In fact, it’s stunning how much of the job growth over the past decade has come out of the health services area. So one way that you can look at this downturn is to say, so long as the health services continues to grow and so long as education continues to hold up, then our better educated workers are going to continue to have jobs that will somewhat limit the impact of the downturn. But this is a blue-collar and pink-collar recession.

Moon: Doesn’t make it any easier for whoever it is who’s losing their job, though.

Farrell: Absolutely right. And do not want to minimize that. Losing your job is terrible. I think, this is one of the times when the consensus is right among economists, where, you know what? When we come out of this downturn, it’s going to be slow. There’s not going to be a lot of job growth. If you lose your job, it’s going to be hard to get another one. And that, for most of us, that’s the definition of a recession.

Moon: I can only say I hope you’re wrong, Chris. (laughter) Our economics editor, Chris Farrell.

Farrell: Thanks a lot, Bob.

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