Believe me, moments like this one will haunt a generation for rest of their lives. I was born in 1944. I knew nothing of the Great Depression of the 1930s and yet, in retrospect, it haunted me indirectly. So many decades later, I can still sense how memories of that economic disaster hovered over my parents' world. Looking back, I can still feel its presence in those years of the golden 1950s when I was growing up (which were actually tough times for my mom and dad). I can still feel it in their fierce arguments about money and their fears for their futures and mine. I can remember it in the way my best friend's dad insisted that he "get a profession" -- because, in Great Depression-style bad times, which that generation always feared might return, it was the only thing (so he believed) that could keep you afloat.
An economic disaster of such an order never leaves you. And for a generation of young people who, even before Covid-19 arrived on these shores, already inhabited a world of skyrocketing school debt; a world in which three men -- Warren Buffett, Jeff Bezos, and Bill Gates -- had more wealth than half the American population combined; a world in which a self-promoting billionaire (who had crashed and burned more than once) made it to the White House; a world of staggering inequality that the present coronaviral crash has left in ruins, the haunting has just begun.
In that context, TomDispatch regular Nomi Prins considers what the two haunting bookends of "the American century," the Great Depression and the Coronavirus Crash, have in common and what the earlier one has to tell us about the otherwise unknown world of catastrophe we've now entered. In the process, she imagines what it might truly mean to "reopen" such a ghostly world. Tom
The Great Depression, Coronavirus Style
Crashes, Then and Now
By Nomi Prins
Many economists believe that a recession is already underway. So do millions of Americans struggling with bills and job losses. While the ghosts of the 2008 financial crisis that sent inequality soaring to new heights in this country are still with us, it's become abundantly clear that the economic disaster brought on by the Covid-19 pandemic has already left the initial shock of that crisis in the dust. While the world has certainly experienced its share of staggering jolts in the past, this cycle of events is likely to prove unparalleled.
The swiftness with which the coronavirus has stolen lives and crippled the economy has been both devastating and unprecedented in living memory. Whatever happens from this moment on, a new and defining chapter in the history of the world is being written right now and we are that history.
Still, to get our bearings, it's worth glancing back nearly a century, to a time when another economic crisis ravaged the country. While the U.S. has come a long way since the Great Depression, there are still lessons to be learned from it about where we might be heading today. Four key factors from that era -- unemployment, the economy, the market, and the Federal Reserve's response -- can provide us with a roadmap for putting this era into historical context.
Unemployment Then and Now
In 1933, the height of the Great Depression, the U.S. unemployment rate reached a stunning 24.9%. In an eerie parallel with today, that double-digit increase had leapt from an era of remarkably low unemployment, 3.2% in the crash year of 1929. By mid-1931, mass layoffs were the new norm and despair was acute and widespread.
Fast forward to the present. In February, the unemployment rate stood at a similar 3.5%. Yet, by May 22nd, in the aftermath of city and state shutdowns and coronavirus shocks, including the collapse of the airline industry and professional sports, new filings for unemployment claims hit an estimated 40 million in 10 weeks, the most jobs lost in the shortest period in American history.
In April, the official unemployment rate reached 14.7%, the worst since the Great Depression, and that official figure doesn't even account for the full scope of the disaster underway. It excludes workers the Bureau of Labor Statistics considers "marginally attached" to the workforce, meaning those not looking for a job because the prospects are so dim, or those who were only laboring part-time. If you factor them in, the unemployment rate already stands at a Great Depression-level 22.8%. Some industries, of course, felt more pain than others. Employment in the leisure and hospitality sector, for instance, fell in April by 7.7 million, or 47%.
Worse yet, low-wage workers have taken the hardest hit. According to a recent Federal Reserve survey, although one in five American workers have lost their jobs, among the lowest-earning Americans, 40% have done so. Among the highest-earning American workers (many of whom could work from home), the rate was "only" 9%.
Federal Reserve Bank of St. Louis President James Bullard has already predicted that the unemployment rate could reach 30% before the end of June. Other Fed economists have suggested that it could go even higher, exceeding Great Depression levels, a chilling thought. As the country, pushed by President Trump's reelection desires, "reopens" relatively quickly (at whatever cost in further Covid-19 deaths), many workers will undoubtedly be brought back or rehired, but there's no avoiding the obvious reality that any number of "temporary" layoffs will become permanent realities.
The Economy: A Century Apart Yet Much the Same
When Covid-19 first hit and self-isolation set in, the stock market plunged and many businesses were forced to shut down normal operations. Various economists and media commentators then began musing about a V-shaped economic rebound -- that is, a quick drop followed by a quick recovery.
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