Monday, January 12, 2009

It's all relative

When a movie is referred to as the "highest grossing of all time", the figure is never adjusted for inflation.  That's why roughly half the films on the list of the highest grossing movies were made after 2000, and why the top ten includes such cinema classics as Shrek 2 and Pirates of the Caribbean.  It's hard to make the comparison when movies are $10 a ticket today and were 25 cents half a century ago.

But it's not just movies.  That's why when job reports come out, it's useful to have some reliable historical data for comparison.  Courtesy of the Minneapolis Federal Reserve Bank, here are some charts that show the current recession relative to past ones:

As you can see, the level of job loss has just reached that of the median post World War II recession.  However, the trend is clearly downward and many economists believe that job losses will continue for months.  The good news is that were still well above where we would be were we 11 months into one of the harshest recessions.

So when you read articles claiming the US economy lost more jobs last month that at any time since 1945, remember that that is a gross number, not adjusted for the larger size of the economy today.  It's bad out there, but it's good to keep some perspective.

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