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A very interesting set of charts comparing the present recession to the Great Depression and the average of other recessions, prepared by Paul Schwartz of the Council on Foreign Relations. Here is one sample chart of the extensive collection, together with the introduction. The full report is an Acrobat file.

It shows that this is a very unusual downturn, unique in some important respects, but generally not on the same scale as the Great Depression. Still, there are enough unusual aspects to this downturn to make for much greater uncertainty than usual about the future course of the global economy.

Quarterly Update: The Recession in Historical Context

June 5, 2009
Paul Swartz
Analyst, International Economics
pswartz@cfr.org

How does the current economic and financial downturn match up to past contractions? This chart book provides a series of answers, plotting current indicators (in red) against the average of all post–World War II recessions (blue). To facilitate comparison, the data are centered on the beginning of the recession (marked by “0”). The dotted lines represent the most severe and the mildest experiences in past cycles. Because the current downturn is frequently compared to the Great Depression, the appendix plots the current recession against the 1930s.
Leo Tolstoy famously said, “Happy families are all alike. Every unhappy family is unhappy in its own way.” So it is with downturns. Unlike most postwar recessions, this one stemmed from an asset market correction that destroyed savings and froze the credit system. The result has been more severe than a typical recession, as these charts show.
Four things to look for in this update:
•
Financial markets have dramatically improved, but from an extremely low base. Rather than pricing in disaster, they anticipate tough times ahead. For example, the charts on the spread for AAA and BAA bonds show the credit market moving from unprecedented panic to a level of fear that is merely in keeping with the worst experiences since 1945.
•
Real economy indicators show signs of stabilization. See in particular the charts on manufacturing sentiment, nonfarm payrolls, oil prices, and car sales. Nonetheless, many of these indicators remain worse than anything hitherto experienced in the postwar period.
•
The collapse in the federal government’s finances is unprecedented, raising questions about how the government deficit will be brought under control.
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By most measures, the current recession is far milder than the Great Depression. But the appendix shows that house prices have recently fallen much more sharply than in the 1930s.