We live by cycles, whether those patterns are imposed by the physical world (the seasons) or by calendar, culture and convention (the school year, sports seasons, the holidays).
Or at least we do until it comes to our economic lives. The economy moves in regular waves, evident with the briefest of glances at a chart of indicators such as Gross Domestic Product, unemployment rates or stock prices. The heights of the peaks and depths of the troughs may vary, as will the length between the highs and lows, but the long-term cyclical nature of the economy is unmistakable.
It would be, anyway, if we didn’t have such a penchant for ignoring the obvious, or trying to will it away when it doesn’t match our vision for life as it should be.
When the Pacific Northwest’s summer lingers into fall, we don’t tell ourselves that perhaps the dark, dreary and wet days of the region’s winters have been permanently erased. As much fun as Thanksgiving or the Fourth of July might be, we don’t expect to get more than one of each in a year.
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But let the economy enjoy a decent run of growth and broad prosperity, and people begin living their lives as though the business cycle is over and done with, that the wave will never crest – all historic evidence notwithstanding.
Which is how we get into trouble. The housing finance debacle – remember it, the thing that started this mess? – became a debacle precisely because lenders and borrowers were living as though multiple business cycles had been banned – interest rates will never again go up, home prices will never again drop, the economy will never again tank, wiping out jobs and the paychecks needed to pay the mortgages on their homes.
Once that domino wobbled and tumbled, it knocked over rows of them that individuals, businesses and government had arranged on the shaky premise that nothing could go wrong.
Now that we’ve discovered that business and economic cycles are not relics of the past, we’re wondering why this latest unpleasant phase of the cycle is over already.
A reading of the historical record provides some sobering evidence that the economy doesn’t descend in a perfectly sloped line to a neatly defined valley floor, nor does it climb the other side of the recessionary canyon at a uniformly upward rate.
Even more jarring, rarely is the decline, the bump along the bottom or the recovery an overnight occurrence.
Perusing the Employment Security Department’s unemployment tables for Tacoma and Pierce County, we find that in the early 1990s recession the jobless rate went from 4.1 percent in August 1990 to 6.7 percent in February and March 1991. After retreating to 5.7 percent in August 1991, it then climbed to 7.9 percent in February 1993 and 8.0 percent in February and March 1994. These data are not adjusted for seasonal hiring and layoff patterns – there’s another cluster of cycles to contend with.
It wasn’t until late 1996 that the Tacoma-Pierce County unemployment rate reliably settled under 5 percent.
That just set us up for the next downturn, the post-dot-com-bust, post-9/11 recession, in which the local jobless rate jumped from 4.7 percent in October 2000 to 8.9 percent several times in 2002 and 2003. Not until the latter half of 2005 did the unemployment rate stay below 6 percent.
In our current economic predicament, the Tacoma-Pierce County unemployment rate exactly doubled in a two-year stretch, from 5.4 percent in March 2008 to 10.8 percent in March 2010.
Two years, and for those who have been through it, it seems a lot longer. But to judge from the duration of previous downturns, we’ve still got a long bumpy road ahead.
That would seem to be borne out by the forecasts and warnings we’re now hearing. As Paul Turek, the Employment Security Department’s regional labor economist noted in a June report, “Prospects for continued employment growth in the area have begun to dim.”
So what will get us out of this? The tapped-out consumer doesn’t have the resources to launch a retailing boom. Tech has held up reasonably well, but we don’t have a big tech sector in this county upon which to rely. Boeing has a decent order backlog, but it certainly isn’t hiring masses of bodies to get planes out. Government is cutting spending. Banks are still ailing (goodbye Cowlitz, as of a week ago). Housing and construction? Check back once all the banks, and the feds, unload the foreclosed and distressed properties they’re stuck with.
The most important contributor to an economic recovery is the one we can do the least about – time. The economy needs time to resolve its problems and rebuild its foundation. No amount of tinkering and tampering will accelerate the process.
Patience isn’t something we as Americans do well in the best of times, and impatience is certainly understandable when families worry daily about paying the bills. Cold comfort though it is to those in hardship, the economy will eventually get back to work and get them back on the job. That’s the good news. The bad news (aside from the time it will take) is that we as a nation will then get back to doing what we do a little too well – ignoring the financial perils that will set us up for the next plunge in the cycle.
Bill Virgin’s column on business and economics appears Sunday in The News Tribune. He is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at firstname.lastname@example.org.