Southern Indiana Business July-August 2020 | Page 14

ECONOMICS
By Uric Dufrene
Greatest Recession and beyond
The verdict is still out on the
official starting and ending
dates of this recession. And
a name will be attached to
this one, just like the Great
Recession moniker that refers to the economic
slowdown of 2008. The magnitude
of this recession is like no other. For
that reason alone, I will refer to it as the
Greatest Recession.
It is too early to tell if unemployment
rates will approach the 25% levels of the
Great Depression. Some estimates do suggest
that the jobless rate will reach that
high, but we can be certainly sure that the
nation’s unemployment rate will exceed
the current level of 14.7%. Current data
suggest that we may have hit a bottom in
national job losses, but keep in mind that
the unemployment rate will continue to
climb after the economy hits a trough. That
is why economists refer to the unemployment
rate as a lagging indicator.
During the Great Recession, the national
unemployment rate hit 9.6%, just as we
were coming out of the recession around
August of 2009. However, in November
2010 the following year, the nation’s
unemployment rate hit a high of 9.8%. In
Southern Indiana, the unemployment rate
reached 12% after the official end of the
recession, and then took another five to six
years to return to the pre-recession unemployment
rate. For the Greatest Recession,
we may be coming out of the official date
of the recession later this year, but we can
expect elevated unemployment rates well
into next year.
During the Great Recession, the Louisville
Metropolitan area lost about 30,000
jobs, and Southern Indiana (defined as
the 5 counties of Floyd, Clark, Harrison,
Washington, and Scott), lost about 7,000.
The Greatest Recession will easily surpass
these numbers. If job losses locally parallel
what is happening nationally, then we can
expect metropolitan losses to get close to
100,000 or higher and Southern Indiana to
be close to 15,000. To illustrate the magnitude
of these losses, the food and drinking
places industry, alone, employed more
than 50,000 in the entire metro area. And
we know what the shutdowns have done
to employment in that important industry.
Layoffs in food and drinking places will
exceed all job losses associated with the
2008 recession. Unfortunately, declines
will not be limited to this one industry.
While this recession will be very deep,
it will be one of the fastest.
Back in March, we
observed the fastest
increase in jobless claims.
Since that time, we are
now seeing the fastest
decline in new job claims.
While the numbers are
still astronomically high,
the trend is heading in the
right direction and we will continue to see
declines in unemployment claims as state
economies continue to reopen. Here in
Southern Indiana, we are also observing a
trend like the national pattern. Unemployment
claims peaked in late March and have
14 July / August 2020