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The recession we are facing might be a deep one. But beyond its touted potential for severity, this downturn is exhibiting characteristics that thus far are differentiating it from those in the past.
This is not true across the board. Behavior of many economic indicators in this recession is similar to their behavior in prior recessions. Despite the hype in the press, for example, most of the series related to employment, such as nonagricultural employment, initial claims for unemployment insurance, and average duration of unemployment, exhibit patterns similar to those of past recessions. (See, AIER Research Reports, February 2, 2009*)
One series in this recession that exhibits patterns different from past experience is new housing permits. The chart below compares the current trend in new permits with the average of trends from the post-war recessions, and with those from the recession of 1981-1982, which was the worst post-war downturn so far. It shows how the number of new housing permits changed relative to the levels at the peaks of the respective business cycles for each of the 18 months before and after the peaks. 
Note: The average is calculated from the 10 postwar recessions prior to this one by taking the mean for each comparable month. The curves show the percentage difference (vertical scale) in the series’ values from the value of that series at the peak of the respective business cycle. New housing permits in the current recession were following the trend similar to that of other recessions for about six months after the peak (to about June of 2008). At that point a change in the trend occurred and a new trend, different from the experience of other past recessions, appears to have started.
The current recession is heavily influenced by the housing crisis, when the extreme oversupply of houses led to an unprecedented drop in new housing construction. It is difficult to say what implications this unusual trend in housing permits holds for the future, except that the resolution of housing market imbalances is important for economic recovery. *Access to all 2008-2009 archives is exclusively for AIER members. Not a member? Learn more about the benefits of Membership. To subscribe to AIER Research Reports, please become a Sustaining Member of AIER. Membership starts at just $39 per year.
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My hunch is that we will still have large numbers of unemployed since the work being done today, even when a recovery takes place, will not come back in the same order of magnitude.
'70's. This is the more benign scenario.If the dummies in Washington pull another Smoot-Hally tariff deal,all bets(and the economy)are off.