So we have been in a recession for over a year and it’s looking like it could possibly last another year. Would that make this a depression? Or is depression a term we just don’t use any more because it’s just too damn . . . depressing?:dubious:
A depression is just a sustained recession.
When you’re out of work, it’s a recession. When I’m out of work, it’s a depression.
Right now we’re having an economic slowdown/downturn (“recession”) concurrent with the collapse of an investment bubble. So it’s a bit more than your average recession. But I think that Depression is now reserved for a truly incapacitating derailment of the economy, one where the whole market is vapor-locked in a state of futility. I’d say that if the current situation gets any worse or fails to improve by the end of 2009, it would be fair to call it a depression.
But is there an actual combination of economic indicators that defines depression? Similar to the way economist define a recession? If you just define it as substaned hardships such as double digit unemployement combined with massive under employeement (pay cuts/reduced work week), housing foreclosures, greatly increased bankruptcy rates and over flowing soup kitchens then Michigan is already there.
I’m not aware of any formal economic description of a depression. The Great Depression was merely a recession that happened to last longer than the others.
They at first were called Panics. We had Panics in 1837, 1857, 1873, 1893, and 1907. By then economics had developed into an academic discipline and the government collected enough data about the national economy to put some solid numbers behind the sense that everyone was doing badly. Panics were recast as recessions, partly because modern economic theory stated that cycles of boom and bust were inevitable in a capitalistic society and the downtrends were merely the next step of that cycle. Progression wasn’t as interesting a name as boom, so nobody used it.
Depression isn’t an economic term, it’s a social term. People will start using it if the recession goes on for so long that people lose hope: probably not a coincidence that the term came into use when psychoanalysis began being well known. But there won’t be a formal marker.
It’s easier to retroactively label a period as “depression” vs trying to define current events in realtime.
It’s hindsight that lets economists & historians label a particular a era as a “minor slowdown”, a “depression”, or a “meltdown.”
Newspapers use these terms and they use them contemporaneously. Economists have formal standards for what a recession is and they can call it as soon as the numbers appear, which is shortly after the second consecutive quarter of negative growth.
Due to the “Great Depression,” I doubt anyone would use the term depression again. Even the term recession is so unpopular it’s being replaced by downturn
But WWI was know as “the Great War” prior to the second conflict. We could be looking at WDII (World Depression 2) or some other catchey acronymn.
I agree they do but the ultimate judgment of whether they are correct will not be known until the negative events have unfolded and the economy is healthy again… especially if trying to spice up words like “depression” with prefix qualifiers like “minor” as in “minor depression” or “great” as in “Great Depression.”
In year 2030, maybe that’s when historians will label the period we’re in as the “Great Armageddon.” At this point, no self-respecting newspaper is willing to describe current events in such hyperbolic terms – we’re too close to the situation to have a detached objective description.
Or in West Wing land, a “bagel.” 
Why not? We used the term war after the Great War. Pretty soon afterward, in fact.
IMO, “downturn” is too general to replace the word “recession”; “recession” is a specific state which can be determined empirically, while “downturn” can mean just about anything as long as it has to do with the economy getting worse. That could change over time, since lexical semantics is fairly fluid, but I think we’ll see one or two more recessions before that change is firmly established (if ever).
Hostile Dialect,
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In the early 30s, unemployment hit at least 25% and some say it was much higher. So far at least we are nowhere near that place. But so far, I have seen no reason to think we couldn’t get there. There are no positive indicators that I’ve seen. I think people will start using the D word if unemployment passes 15% or if it stays above 10% for several years and shows no signs of coming down. But this question does not have a definitive answer and probably should be in another forum.
So is a slump worse than a depression?
No.
I think some amount of this is self fulfilling prophecy. Regardless of whether you call it a recession, depression or downturn, if consumer spending is a large part of your economy, and consumers believe that things are getting worse , they will spend less, which causes consumer spending to decline over time, and which leads to more dire predictions. It becomes a downward spiral based on the predictions of worse times ahead.
While 10% unemployment isn’t good, 90% of the working population is working, and by not spending out of fear of the future they can cause more people to lose their jobs, which causes more fear, uncertainty and doubt. If you have a reasonably secure job you should continue to spend within reason (don’t borrow more money than you can handle) so that the economy continues to chug along. Tired of renting and thinking of buying a house? Go out and buy one. Interest rates are low and there are bargains almost everywhere. We need to clear out the inventory of housing for sale so that new houses can be built. New housing will require more workers and slowly the economy will improve. Sitting on the sidlings in fear of a depression just makes the problem worse.
If everyone justs hides their money under the matress because they are worried that the next great depression is right around the corner they can actually cause things to get worse than they normally would. Unfortunately, people have to believe things will get better before they will start spending again. As long as they believe that things are getting worse they will behave in ways that actually make things worse.
IIRC, one survey in 1932-33 (unscientific, the only kind there were then) said 59% of those employed were on some kind of short time. That left only 16% of the workforce - *less than one person in six *- employed full-time, presumably at greatly reduced pay.
There’s also a school of thought that says “if we calculated unemployment now as we did in 1933, the rate would be about double.” FWTW; is that worth looking into, or can it be easily pulled apart?
Here’s a link that defines a depression as when the GDP declines by more than 10%. I do remember something like that from economics class. Now-a-days, they do actually try to put numbers on it, it is not just a decription of the state of the economy, it is measurable.
Prior to the Great Depression, depression and recession were used interchangeably, and depression was in fact the more common term.