As the country enters its second year of recession, often described as one of the worst since the Great Depression, experts are starting to ask whether we are in a depression again, or heading toward one.
It’s a question no one can answer with certainty. There is no official definition of a depression or a group that can say when one starts or stops.
But there are big differences between today and the 1930s, which were characterized by unemployment numbers that exceeded 25 percent and images of migrant workers, tent cities and soup lines.
The Economist magazine noted there appears to be two principal criteria for distinguishing a recession from a depression: A depression has a decline in gross domestic product of more than 10 percent or is a recession lasting more than three years. We haven’t met either of those criteria yet.
The GDP is expected to drop about 4 percent this year, said Lee McPheters, an economist at Arizona State University. And the recession is only about 13 months old, according to the National Bureau of Economic Research in Cambridge, Mass.
The national unemployment for December was 7.2 percent, the highest in 16 years. Arizona’s jobless rate remains at 6.3 percent until a new report comes out Jan. 22.
Peter Morici, an economist and professor with the University of Maryland, says the country has entered a depression because it faces underlying structural problems such as a trade deficit, dependence on imported oil and a shortage of lending money.
“To me, the hallmark of the Great Depression was the inability of the economy to pull itself out,” he said. “We had massive amounts of stimulus, both from (Presidents Herbert) Hoover and (Franklin) Roosevelt.”
Morici worries that any stimulus programs adopted under President George W. Bush or President-elect Barack Obama will be just temporary fixes.
“My feeling is that . . . if (the president) doesn’t fix what’s structurally broken, what caused this, we’ll be back into this after the federal stimulus has had its effect,” Morici said.
Some people attending a job fair in Mesa on Monday said that while they may be mentally depressed, the economy doesn’t appear to be that bad.
Kevin Peek, 45, of Phoenix, who lost his 17-year job at Showcase Home Entertainment when the retailer closed in November, said, “It’s probably a combination of both, recession and depression.”
Mary Ann Buelna of Queen Creek, who was looking for part-time work, said, “It really is a sad situation. I wonder if we are in the first phase of something that could lead us there (depression).”
Traci Miller, 36, of Chandler, said after visiting the Arizona Science Center in downtown Phoenix that it’s not visibly obvious there is a recession, much less a depression.
“The restaurants are full. We are not really seeing it when we go shopping. There seems like there are still a lot of people shopping and eating out.”
Her husband has a secure job as a traveling nurse practitioner and is now working on the Gila River Reservation.
Scottsdale economist Elliott Pollack said it’s possible but not likely the country could go into a depression.
It’s too early to say, he said.
“Time will tell,” Pollack said. “But certainly the (federal) policy errors that would turn this into a depression don’t appear to be there yet.
“The economy is going to spiral down for the next six months at least.”
Marshall Vest, a University of Arizona economist, said it’s too early to say whether things will get worse.
“I think if the freezing we have seen in the credit markets continued for a long period of time, for a few years, then I think you could start to consider whether we are in a depression. However, we are very early in this financial crisis,” he said.
Vest added that the financial markets appear to have begun thawing over the past few weeks, and the stock market may have bottomed out in November.
He expects the economy to bottom out by the middle or end of the year.
“There is no question it (the recession) is severe and it will go into the record books as the worse since the depression, but that does not mean it is of the same magnitude.”