Just How Tough is Today’s Economy?

Just How Tough is Today's Economy?

My timing is terrible, but then, you can’t help when you’re born.

I got out of college in the early 1980s, when the economy was struggling and jobs were hard to find. Things got better both for myself and the economy, and I spent much of the 1990s and early 2000s recruiting job candidates at a time when unemployment was low and qualified job seekers were hard to find. However, by the time my kids reached their 20s and were getting ready to go out into the job market, things had returned to pretty much the conditions I graduated into – a weak economy and high unemployment.

So, I’ve given a fair amount of thought to whether things today are worse than ever, or whether this is just all part of a cycle. It’s an important question – there’s a certain comfort in realizing you’ve been there before, as opposed to feeling like the economy is in a long-term nosedive.

So, here are six comparisons between today and a generation ago. Things are certainly different today – but not necessarily worse.

  1. Inflation. This was one of the scourges of the late 1970s and early 1980s. Inflation was 5 percent or greater for nine straight years at one point, peaking at 13.3 percent in 1979. In contrast, inflation hasn’t reached 5 percent since 1990, and has been below 2 percent for three of the last five years. Yes, today’s low inflation is partially a symptom of a weak economy, but the economy was weak in the late 1970s and early 1980s as well, with rising prices just making it all the tougher on consumers.
  2. Economic growth. How weak was the economy back in the early 1980s? Two out of the first three years of the decade saw negative real economic growth. In contrast, the economy has now grown for three straight years, following the deep recession of 2008/2009. The “double-dip” recession of the early 1980s is exactly what policy makers fear will happen to the current economy. 2013 may be pivotal in determining whether that fear will be realized.
  3. Unemployment. The unemployment rate has now been above 7 percent for four years, and peaked at 10 percent in October of 2009. That’s a tough job market, but unemployment was even worse in the early 1980s. Unemployment stayed above 7 percent for more than five-and-a-half years, and was above 10 percent for 10 straight months.
  4. Interest rates. This is one of the most interesting aspects of this discussion, because things are extremely different now than they were in the early 1980s, but whether this is better or worse depends on your perspective. 30-year mortgage rates averaged more than 10 percent in every year from 1979 through 1990, peaking at 16.63 percent in 1981. Today, mortgage rates have fallen for six straight years, and averaged 3.66 percent last year. So interest rates are much better now if you want to buy a house, or otherwise borrow money. But what about savers? Short-term deposit rates averaged more than 10 percent in four of the first five years of the 1980s; now, they are down to 0.19 percent. Perhaps this is a toss-up – high interest rates favor savers, while low interest rates favor borrowers. Still, one thing that troubles me about the current environment is that the economy gained a great deal of momentum in the 1980s and 1990s from falling interest rates, whereas today there is nowhere for interest rates to fall
  5. Personal savings rates. Personal savings rates were a robust 9.8 percent in 1980, and then above 10 percent in three of the next four years. Savings have fallen off a great deal since then – the personal savings rate hasn’t been above 6 percent since the early 1990s. To the extent that savings help fuel future economic growth, this aspect of the economy was definitely better in the early 1980s than it is now.
  6. The federal deficit. People were up in arms when the annual deficit first exceeded $100 billion in 1982, and then crossed the $200 billion mark the very next year. As we now know, that was nothing – the deficit has exceeded a trillion dollars in each of the last four years. To put this in a broader economic perspective, the deficit was 4.0 percent of GDP in 1982, and 8.5 percent of GDP in 2012. Like personal savings rates, government budget management has gotten worse over time.

In short, some things look worse now, but some looked worse thirty years ago. The good news is that what happened after the bleak years of the early 1980s was improved growth later in the decade, then after a brief recession, a long stretch of growth in the 1990s.

One of the keys to the turnaround was a breakthrough, bi-partisan deal on tax reform. Perhaps today’s politicians will follow that example and reach a similar game-changing deal to address the deficit.

7 Responses to “Just How Tough is Today’s Economy?”

  1. Anonymous

    Often they come to me physically and emotionally exhausted.
    This is often a subtle change and it can occur very slowly.
    Even if in your divine wisdom you cannot see anything good coming out of the choices your adult child is making,
    they are not your decisions to make.

  2. Anonymous

    Jill, BG provides some good advice. If you want to look for additional career ideas, a good source to check out is the Occupational Outlook Handbook from the Bureau of Labor Statistics:


    This gives a description of various occupations as well as total employment numbers and a projection of the job growth over the next decade or so. It can be a good source for checking the prospects for a given career, or for browsing to find career ideas for a person who isn’t decided yet.

    Also, don’t be afraid to have your daughter try working for a year or two if she leaves high school without a clear motivation for college. Better to take the time to gain a little direction than to waste time and money with a half-hearted effort at college.

  3. Anonymous

    I kind of lucked out with how things have worked in my favor so far, although I know that could change. My husband and I have had two mortgages now, and both had really low interest rates. My father said at one time his mortgage interest rate was nearly 19%.

  4. Anonymous

    Jill) Nursing / Medical: can’t outsource that.

    And stress that she gets real-work experience while working on the degree. Regardless of the field chosen, employers are going to hire someone with experience over someone who doesn’t have any.

  5. Anonymous

    I have a daughter that is a high school junior. She has no idea where she wants to go to college, major in, etc. In this economy (and we graduated in 1981, so I remember what you’re talking about) how do you guide your teen? I don’t know what to tell her. husband and her father, majored in computer science, thinking that he would always have a job somewhere.
    Not so. Especially with all of the outsourcing now.

  6. Anonymous

    I agree with you that things are pretty bleak right now in our economy but I do believe it is part of a cycle. Things seem to run in cycles that way in history. The housing economy does seem pretty bad too, but we just need to wait it out. You’ve made some very good points.

  7. Anonymous

    I grew up in a locally depressed area. You had to “know” someone just to get an interview for a part time job during high school or for college. There were dozens of applications for every job. Lots of retailers and employers used the Christmas help model for hiring (hire five to ten people part time for a defined length of time and keep the one or two that you like). After dozens of interviews I got a job in my engineering degree field a year after graduating for half the average starting salary over a thousand miles away. My friend with the same degree and a much higher GPA who refused to move was back at school for a pharmacy degree when he and three others got hired for a one year stint, he was the one they kept and he told me they were always threatening to move his branch of the company out of state.

    I also recall the seventies and early eighties and just shake my head at the people on other blogs who whine that they wish things were like they were back when they got double digit interest rates on their CDs, yet they completely forget the hand in hand hell of double digit inflation and how it slaughtered real wages and savings. Having salaries lose a third to half their buying power over five years sucks for workers and sucks for business. People haven’t felt that pain for almost 30 years, and I don’t really want to go back to it just so I can brag about how much my CD is making.

    So I can feel for my kids as they tried getting jobs while in school over the last couple of years. But on the other hand, it isn’t as bad as where and when I grew up and I don’t think it’s as bad as it could be. Of course, that’s small comfort and always is for the person on the downside struggling, no matter how good the “indicators” are.

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