Labor Numbers Conjure Up Ghosts Of Past Crises

This month, the U.S. hit another milestone — 5.7 million people filed for unemployment benefits in just one week, more than at any time since the figures began to be collected in the 1960s. Host Jacki Lyden reflects on the unemployment figures and speaks with financial historian Richard Sylla about just how relevant past times of hardship — especially the Great Depression — are today.

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JACKI LYDEN, host:

It's January 31st, the last day of the month, and what a month it's been for American workers. On Monday alone, American companies slashed nearly 60,000 jobs - Caterpillar, Home Depot, Sprint Nextel, Pfizer. As one economist said, there is no refuge now.

The last day of the month finds record numbers of people staring down the first of the month with no job in sight. Here in Washington, 32-year-old Will John(ph) is one of them. We found him in the cold outside.

Mr. WILL JOHN: This is the Department of Human Development, 645 H Street.

LYDEN: The place where you sign up for food stamps. He was steeling himself to go in.

Mr. JOHN: Well, this is my very first time applying for food stamps. And basically, I've always felt that those that actually needed food stamps are the ones that, you know, should come down and apply. But as it turns out, I'm currently one of those in need, so there you have it.

LYDEN: Will John, laid off from his job in food services, is terrified, he said, about his chances of finding work. We'll talk to two more of the recently laid off in a moment.

Across the country, a record 4.8 million people are collecting unemployment benefits. It's the highest number in 40 years, and the mounting layoff have analysts conjuring the ghost of an even deeper past.

Richard Sylla is a financial historian at New York University. With so much talk about the Great Depression, I asked him how apt that comparison is.

Dr. RICHARD SYLLA (History of Financial Institutions; Economics, New York University): Well, there's still a big difference. I mean, there were many more people unemployed in the 1930s, especially as a percent of the population. We got up to well above 20 percent unemployment in 1932, so this is not nearly as bad as that.

The big thing that I see that's different about today and in the 1930s is that when the financial problems became evident, our authorities sprang into action, particularly the Federal Reserve and then it was joined by the Treasury, adding liquidity and coming up with innovative schemes to help bail out the financial system.

In the 1930s, the big problem was that the bottom fell out of the economy before the authorities did very much. So that's a real big difference between now and the Great Depression era.

LYDEN: The other major spectre that's raised is 1982 when unemployment hit 10 percent, and we do seem to be accelerating in that direction as we mentioned a moment ago. How much did that recession resemble this one?

Dr. SYLLA: Well, it was the worst recession, we said at that time, since the 1930s. And the major difference is we sort of had that recession on purpose. That is - if one remembers the 1970s, inflation rose throughout the 1970s and was really getting out of control by 1979-80. We had double-digit inflation. We let interest rates go through the roof to stop inflation, and as a by product of that, unemployment went up to the highest level since the Great Depression of the 1930s.

LYDEN: I'd like to ask the historian in you as much as the economist, you know. Are people panicked in the way that they were back in the '30s when we did see the long lines and people riding the rails, and you know, it seems it's a different America now, but people speak of these things and you wonder if the fear isn't somehow similar?

Dr. SYLLA: I would say it is similar. I get around and talk to a lot of groups. In New York, I talk to a lot of financial groups, and of course, the epicenter of the crisis is in the financial sector. These people are really scared.

I actually try to cheer them up a little and say that financial crises do happen, they've been happening for 300 years. They are terrible when you're in the middle of them, but they always do go away. And, you know, somehow that is comforting to people today because they think, gee, we're in a crisis, and there doesn't seem to be any way out of it. So, they feel a little comforted when I say, you know, they always do come to an end, and this one will, too.

LYDEN: Richard Sylla is professor of economics, entrepreneurship, and innovation at the Stern School Business at NYU, and he joins us from our New York studios. Thank you very much.

Dr. SYLLA: You're welcome.

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