“Real World” Personal Strategy Blog

How Bad Are Things…Really?

“I have become my own version of an optimist. If I can’t make it through one door, I’ll go through another door — or I’ll make a door. Something terrific will come no matter how dark the present.”

- Joan Rivers

The way people are talking these days, we’re somewhere in between The Grapes of Wrath and the fall of Rome. Or worse.

And look–I’m not denying the very real problems in our economy right now, but as a financial pro, I often take solace by hunkering down and examining the real numbers behind a problem.

Yes, we’re in a recession. Yes, unemployment is up (and, I’m keenly aware that some of my clients and their friends are feeling this in a deeply personal way). Yes, the government is spending a bunch of our money…with results yet unclear, and in the future.

[By the way, here's a handy little article about the provisions of the stimulus bill which affect most Americans, like you and me: http://www.nytimes.com/2009/02/13/your-money/13money.html?ref=business]

But, I’d like to take a moment in my Strategy Note below, to point out some economic facts about where we really stand. I’m not so vain as to believe my little “shot” into the ether will entirely lift the sagging shoulders or skyrocket your consumer confidence…but again, there can be sanity in the real numbers, I’ve found.

So, read on…and send me your feedback!

“Real World” Personal Strategy

How Bad Are Things…Really?

There really is a lot of fear out there about our economic present…and future. Some of this has to do with all the talk flying around, from both the media, and by our government leaders.

And yes…things aren’t good. But they’re also not as bad as the 1930′s. Consider:

In the last year, we’ve lost 3.4 million jobs. That’s not a good number, of course, but is it the 1930′s? Let’s look deeper into the numbers… it represents 2.2% of the labor force. As a matter of perspective, from November 1981 to October 1982, 2.4 million jobs were lost — fewer in number than today, but the labor force was smaller. So from 1981-82 total job losses were 2.2% of the labor force…the same as today.

More historical data: job losses in the Great Depression were much, much worse. In 1930 alone, the economy lost 4.8% of the labor force (more than double what just occurred). In 1931, another 6.5% (almost triple today’s numbers). And then in 1932 it was even worse–7.1% additional unemployment. In the 1930′s, for three sustained years, jobs were being lost at double or triple the rate of 2008-09 or 1981-82.

And looking at the comparative, overall unemployment rates brings further clarity. Current U.S. unemployment is at 7.6%. That’s actually more than three percentage points below what it was in 1982 (10.8%) and not even a third of what we saw as a nation in 1932 (25.2%). Does it sound to you like we’re re-living the Great Depression yet? If anything, we’re re-living the early 80′s.

And there’s other numbers which flesh out the story: “Real” Gross Domestic Product (GDP) actually rose in 2008, despite a cruddy fourth quarter. The politically-neutral Congressional Budget Office projects a GDP decline of 2% in 2009. In 1982, the GDP contracted by 1.9%. But in 1930, the GDP fell by 9%, and in 1931, by another 8%, and in 1932, it fell yet another 13%.

When you look at other numbers, including auto-production, and other manufacturing indices, it’s even more stark. We’re not in a Depression, folks.

Now…all this doesn’t mean it’s inappropriate for us all to put our financial house in better shape. In fact, that’s exactly what I recommend. If you’d like to set up a special consultation to take a look at your finances, send me an email or call our office, and we’ll see what we can do to squeeze you in between our many, many tax appointments.

Next week, I’ll give you some tips on managing your mindset during this crazy time. You have a choice about how much fear you live with!

So, until next week…keep your head up!

To more of your money in your wallet!