We're So Gloomy

I haven't really been able to sort out exactly why there has been this degree of pessimism. George Bush

Consider the excerpts from this Time Magazine article.

Why are Americans so gloomy, fearful and even panicked about the current economic slump? Ten years ago we would have thought this was paradise, and now we're whining about it," says David Wyss, chief economist for the consulting firm DRI/McGraw Hill.

Many, many business leaders share this lack of confidence and recognize that we are in real economic trouble," Says University of Michigan economist Paul McCracken. "This is more than just a recession in the conventional sense. What has happened has put the fear of God into people."

Americans are so uneasy because they feel economic turmoil on two levels, one relatively superficial and the other much deeper. The deeper tremors emanate from the kind of change that occurs only once every few decades.

Many economists agree that the U.S. will face at least several years of very modest growth, probably in the 2% to 3% range, as consumers and companies work off the vast debt they assumed.

The reckless borrowing made a reckoning inevitable. "You can't spend eight years priming the pump and getting all your growth through debt in the private, corporate and public sectors and expect to come out of it overnight," says John Bryan, chairman of Sara Lee.

"We're not going to get any momentous return to growth anytime soon," concurs an Administration economist. "People are smarter than we give them credit for. They've known we couldn't keep borrowing our way to prosperity forever."

While some economists have described the current slump as a near depression, that phrase overstates the case if it is taken as a comparison with the period 1929-33, when the U.S. economy contracted by nearly a third.

In some respects, the current recession is more painful than the numbers show because this slump is so different from most. The current unemployment rate appears to be well below the level reached in the 1981-82 recession, when joblessness peaked at 10.8%. But experts say the comparison is misleading because the labor force is growing far more slowly today than a decade ago, which means that fewer people are seeking jobs.

Another factor that has aggravated unease in this recession is that there has been no sense of leadership, let alone prescience, from Washington. Consumers were blindsided by the failure of the White House and most economists to foresee the length of the downturn. "Everyone was told it was going to be mild," says Stephen Levy, director of the Center for the Continuing Study of the California Economy.

Consumers will have to open their wallets before any recovery can get rolling, and that is by no means ensured.

So far, though, no reprieve from layoffs is anywhere in sight.

At the very least, the current malaise has raised the public's consciousness about the need for real leadership and accountability in both Washington and corporate America. People are smart enough to know when they are being squeezed.

OK, I did leave hints in this excerpt of a Time Magazine article. Did you pick them up? Here was a major hint:

The current unemployment rate appears to be well below the level reached in the 1981-82 recession, when joblessness peaked at 10.8%. But experts say the comparison is misleading because the labor force is growing far more slowly today than a decade ago...

First of all, the quote was from President George Bush.


The Time article was published January 13, 1992 (ie, "today" in this article) by John Greenwald.



Here are trends in unemployment rates--including that 1990-91 recessionary period, and today (2008).



Time will tell if/when we reach the unemployment rate of the 1990-91 recession, or of 1973-74, or of 1981-82...let alone the peak of the Great Depression which reached 25.6%.

Regardless, financial setbacks are not fun, and we tend to be a gloomy sort when things aren't going our way.

Around the globe, 18 of 24 countries surveyed by Pew describe current economic conditions as bad. The negative economic outlook is worse as the median percentage rating their national economy as "bad" rose from 50% in 2007 to 61% in the latest survey.

Two notable exceptions, China and India, remain upbeat about national economic conditions, although Indians are less positive than they were a year ago. Some of the most negative evaluations of economic conditions come from citizens of advanced Western countries.