My Scariest Graph

by Andrew McAfee on November 17, 2011

Everyone has their own candidate for ‘scariest graph of recent economic news.’ Here’s mine.

It comes from the excellent recent McKinsey Global Institute report “An economy that works: Job creation and America’s future.” The MGI team had the clever idea to plot how quickly jobs came back as the economy rebounded after each post-war recession. To be more precise, for each recession-and-recovery cycle they graphed how many months it took for the total # of jobs to get back to its pre-recession peak after GDP had come back to its pre-recession peak. There’s always a lag – jobs come back more slowly than GPD does —  but MGI wanted to see if that lag had been growing or shrinking over the years.

It’s been growing. A lot. Here’s the graph:

The cycles from 1948 to 1981 are remarkably consistent — it takes about half a year for employment to come back. And then things started to change; the employment recovery following the 1990 recession took almost twice as long as any previous one, and the 2001 time lag was over twice as long again. Given the depth and severity of the Great Recession and the achingly slow pace of job creation since its end, everyone expects the 2008 column on this graph to be by far the tallest one. In fact, there’s a lot of concern that we might not even get back to pre-recession employment levels before the next recession hits.

I don’t think it’s any coincidence that the lags get longer and longer as we head ever-deeper into the digital era. Recessions force companies to take a hard look at themselves and learn what they can do without. As computers get more and more powerful and capable businesses find that they can do without as many people. They then find that even when growth resumes they don’t need to resume hiring at anything like the pre-recession pace, since each worker they have is so much more productive and capable thanks to technology. So I don’t know how long the column for the 2008 recession is going to be on the above graphs, but something tells me it’s going to loom over the other ones like a skyscraper over a residential neighborhood.

What’s your scariest graph? And which ones, if any, contain good news? Leave a comment, please, and let us know.

  • http://www.xpragma.com Marc Buyens

    An interesting graph indeed. However, its message is not about the increasing difficulty to recover from a recession. Its message is about how our society has become.

    Increasingly, our society has become less labour intensive. So, maintaining identical job levels requires GDP growth. If not, a decrease of employment is a natural thing and when growth restarts, the time to recover the job gap only increases. Exponentially, a logical consequence of our digital era.

    The problem has nothing to do with recessions. It is a logical consequence of our society dynamics that favour maximizing the return for the few, instead of maximizing the jobs for the many. Recessions only highlight this chasm but are not the cause for it.

  • http://www.xpragma.com Marc Buyens

    An interesting graph indeed. However, its message is not about the increasing difficulty to recover from a recession. Its message is about how our society has become.

    Increasingly, our society has become less labour intensive. So, maintaining identical job levels requires GDP growth. If not, a decrease of employment is a natural thing and when growth restarts, the time to recover the job gap only increases. Exponentially, a logical consequence of our digital era.

    The problem has nothing to do with recessions. It is a logical consequence of our society dynamics that favour maximizing the return for the few, instead of maximizing the jobs for the many. Recessions only highlight this chasm but are not the cause for it.

  • http://caddellinsightgroup.com jmcaddell

    This is what the graph tells me: We are now all entrepreneurs and cannot rely on corporations and institutions to provide us jobs. We have to find a valuable niche, grow and market ourselves, and continually increase our capabilities and value. It’s a cold message, but I think that’s the way it is.

    regards, John

  • http://www.facebook.com/preston.lathrop Preston Lathrop

    John and Marc provided wordly philosophical views that were true and factual. However, the philosopical stance strikes me as a bit defensive in this context. We soften the viseral effect of disheartening job numbers by taking an elevated systems view. Meanwhile, our friends, colleagues, family members, and some of us personally have had the career rug pulled rudely out from under us. This graph illustrates the scale of the disruption to our nation’s economic model. From that point of view, it is indeed a scary graph.

  • Anonymous

    I’ve read the UK needs 2% growth just to stabilise unemployment rates, cutting them requires above 2% growth. 

    Our reality is that we’ve only intermittently had above 2% growth, there’ve been 3 deep recessions in the last 15 years and the most optimistic economic forecast for the near future puts growth at 1.2%.   Just to add to the fun, personal debt is scarily high and large numbers of us have NO savings at all.

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