Is current recession worse than the last recession?

Question

I found this 2002 New York Times article -  "Many Ride Out the Recession In a Graduate School Harbor"   - online.

https://query.nytimes.com/gst/fullpage.html?res=9F0CEFD91E3BF937A15752C0A9649C8B63

Some of the numbers in this article is just unbelievable.

This led me to ask myself: " Compared to the last recession back in 2002, is the current recession going to be worse?"

I want to know what others think about this issue. In my opinion, current recession will last longer and cause some serious damage....even creating a bigger impact than the last one.

Although the preliminary application numbers (if this is indeed an indicator) for top programs are nowhere near the numbers stated in the article above, it is still too early. But I am putting my money on the possibility that this recession will be far worse than the last one.

jallenmorris · Answer

I think your assesment of the current recession lasting longer depends on many factors. I think what we do to bail out certain industries will have a significant impact on how long the recession, or at the very least our national debt, remains.

I'm not sure anyone has a great idea of what to expect.

I'm not sure anyone has a great idea of what to expect.

liubhs02 · Answer

A more apt title would be "Is current depression worse than the last depression?"

ozzie123 · Answer

I wouldn't say that the US is in depression just yet, things are not that bad and some sectors are still churning out. The one that is near a complete halt or just grinding along is just manufacturing and financials.

Sure with all the money the government spend to "save" the economy will pull us through this recession faster than if no money dispensed, but it will only exacerbate the depth of the next recession.

That's why I was quite curious on the reasoning behind the news flash that said that the admission number will increase significantly compared to the last several recession. With students getting trouble on securing a student loan and univ endowment is in trouble (Even Harvard's - arguably the best managed endowment fund - has a significant drawdown this year) I don't see how.

fall09 · Answer

We were on the brink of a depression in Oct but not now.Both Monetary and Fiscal policies helped us to come out of that fear.We are probably headed for a deep recession.I think recession in 2002 lasted only 8 months,but this one has been almost an yr.Unemployment was 6.7% in nov.It is expected to go to 8.5% soon.

I believe the key is to put a floor on the home prices.It might happen sometime in the second half of 2009.

I believe the key is to put a floor on the home prices.It might happen sometime in the second half of 2009.

IHateTheGMAT · Answer

I think the depression talk is a massive exaggeration. During the great depression the unemployment rate was like 25-30% (to lazy to look up the exact number). Right now its around 7% and the most dire prediction call for an increase to 8-10% by the time this recession ends.

As far as whether this recession will be longer then the last one - it already is. This recession officially started in December 2007 and is still going strong. That's 1 year so far. The last 2 recessions each lasted about 9 months.

nink · Answer

I agree that it's little too early to bring up "depression" in current economy. However, current unemployment rate of 6.7% is really deflated because many individuals simply gave up looking for work. According to NYTimes article: https://www.nytimes.com/2008/12/06/busin ... ent&st=cse The unemployment rate does not include those too discouraged to look for work any longer or those working fewer hours than they would like. Add those people to the roster of the unemployed, and the rate hit a record 12.5 percent in November, up 1.5 percentage points since September. Also back in 1930's - US Census data shows that population in US was at 122,775,046. As of July 2008, it is estimated at 303,824,640. Therefore, the size of current workforce (whether counted in US unemployment stats or not) is larger than the work force in 1930s. There's a good reason to worry about possibility of depression if this continues in my opinion.

IHateTheGMAT · Answer

ninkorn,

Good data. I agree that this will be (probably already is) a deep recession. It's already lasted longer than the last 2 recessions and some economists are projecting GDP growth of negative 6% this quarter! Virtually all economists are also projecting negative GDP growth next quarter. No question this is the worst recession in some time and it probably has at least another year to go. Most predictions I'm hearing now call for an end to this recession in early 2010. That would make for a pretty long and severe recession.

However, during the great depression the unemployment rate hit 25% (I just checked). I think you have to compare the unemployment rate (not number of unemployed) to get an apples to apples comparison. Also I don't think you can use the NYTs "adjusted" unemployment rate unless you are comparing it to a similarly adjusted employment rate during the great depression. An apples to apples comparison would be 6.7% now vs 25% then. In addition I found this quote describing conditions during the great depression:

""Hoovervilles," or shantytowns built of packing crates, abandoned cars, and other scraps, sprung up across the nation. Residents of the Great Plains area, where the effects of the Depression were intensified by drought and dust storms, simply abandoned their farms and headed for California in hopes of finding a true "land of milk and honey." Gangs of unemployed youth, whose families could no longer support them, rode the rails as hobos in search of work. America's unemployed citizens were on the move, but there was no place to go that offered relief from the Great Depression. "

I just don't think that's where we're headed.

Audio · Answer

Do be honest, nobody has a clue on what is going to happen next. But to be sure, this is a very bad recession: our generation has not seen one like this.

But what I can tell you is that recruiting is - surprisingly enough - no suffering so badly as in 2001 for example (I'm talking here about class of 2010, class of 2009 are feeling it). IB summer traineeships are available, contrary to 2001, where everything was shut. Those of you who get in for 2011 have good chances of getting out in a good period.

nink · Answer

Thanks for the info. I did read an article interview somewhere before with a Lehman HR director (back when Lehman was still around). They were talking about how many banks are in shortage of potential VP/MD candidates in the organization due to cut backs in recruitment back in 2001. Therefore, they weren't planning to cut back internships and other recruiting activities even if there's another recession in the future. i guess it's true :-D

Audio · Answer

I actually don't know how true it is, but that's what we've been hearing at every information session. There are some banks who are drastically cutting summer internship recruiting, but most of them aren't. First of all it's stupid because we're so cheap, secondly for the reasons the guy from Lehman mentions. But you can feel that's it's clearly more competitive: the are selectively recruiting.

To give you an example that I can talk about, recruitment in Europe is tougher than before, especially for those who either have no ties to IB (but you could still get away with it) and most of all for those who have no ties to Europe (that's almost mission impossible). So yes, banks are recruiting, but they are clearly more selective.

MGOBLUE2 · Answer

I think what will be more telling is not what we are hearing at information sessions, but what actually happens.

In a few months, we will know if intern hiring stays relatively flat like we're being told.

Audio · Answer

Exactly. The figures they are mentioning sound positive (about 10% of reductions in positions for internships more or less), but we'll see:

1. if they are actually going to recruit those numbers for the summer
2. how the conversion ratio looks after the summer (even more important)

Citi (I think, but I'm pretty sure) had 8 interns last year, and recruited ZERO. Nobody's going to tell me they were all bad.

xerox · Answer

I know a second year at Wharton who has interviewed for a full-time position in Europe with Citi, and things are looking good for this person. Another friend of mine, a first year student, has already got an internship with them in Japan. Chinese banks are using this moment of uncertainty on the US job market to hire top talent. And they are hiring like never before - on Dec 13 there will be a job fair in NY, where they are looking to fill 170 positions in top Chinese banks and financial institutions. The organizers sent out an excel spreadsheet with a bunch of job descriptions and all of them state "a degree from a top American or Chinese" university as a must-have. Looks like it is time to look beyond the US borders for good jobs.

nink · Answer

Remember that MIT grad guy who was on TV because he walked around streets of Midtown NYC with sandwich cardboard sign on his neck saying "MIT GRAD for Hire"???? Apparently he landed a job!! :-D

https://www.nypost.com/seven/12112008/ne ... 143653.htm Hopefully, none of us will have to resort to his tactics when we are done with our MBAs.

xerox · Answer

That's so true about first year pre-MBA and about that long during. In this economy could be even a longer period of uncertainty in terms of jobs.

Is current recession worse than the last recession?

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