1980 recession: how deep it was and how it compares to 2010

In the early 1980s, the United States suffered a recession. In 1980, the gross domestic product measured -0.3%. The following year, GDP grew at 2.5%, in 1982 it fell again to -1.9%. During this period the unemployment rate was on the rise. The good news, however, was that interest rates, which had previously been through the roof, were coming down. From 1983 to 1989, GDP grew steadily, interest rates fell steadily, and the unemployment rate also fell. In fact, the 1980s were a time of great prosperity, but the decade began, like this decade, in recession. In this article, we’ll compare the recession of the early 1980s to our most recent recession.

two negative quarters

A recession begins when a country experiences two consecutive quarters of negative growth as measured by GDP. In the first quarter of 1980 the GDP was -0.3%. Quarter number two of 1980, GDP measured -7.9%. This indicated a very deep recession in 1980. However, the economy recovered somewhat and ended the year with a GDP of -0.3%.

In the first quarter of 1981, when Ronald Reagan took office as president of the United States, GDP had grown and the country was technically out of recession. However, by early 1982, growth had again entered negative territory, thus starting a new recession. At the time, the unemployment rate was 8.6%.

Interest rates fall, unemployment rises

In 1982, the economy began to grow again. Interest rates that had been high continued to fall. However, the unemployment rate continued to rise, and by early 1983 it had peaked at 10.4%. This was the last bad economic news of the 1980s. Since then, the economy has experienced 28 consecutive quarters of growth. Mortgage rates fell from around 20% to around 9%. In short, from 1983 to 1989, the United States enjoyed one of the strongest economic periods in its history.

2008 recession

At the end of 2008, the US economy entered a recession. At the end of 2009, it came out of this recession. However, the growth experienced after coming out of the recession was modest. For example, in quarters one and two of 2010 GDP was 3.7% and 2.4% respectively. However, in contrast, the first two quarters of 1983 showed growth of 5.1% and 9.3% respectively.

In 2010, the unemployment rate has remained stable at 9.7%. However, the problem with the economic indicators in this period is the fact that unemployment is rising, GDP growth is modest, and interest rates are near a record low.

The problem that the United States experienced in the early 1980s was that interest rates were very high. Very few people could afford to buy houses due to high mortgage rates. Refinancing was absolutely out of the question. In 2010, we have a different set of problems. Most notable would be the growing national debt and housing crisis.

Still, I remember the early 80s and there were a lot of people who thought it was over back then. Certainly the economy suffered for most of the 1970s up until 1983. So the US has been through hard times before and we’ve come away smelling like a rose. The point is, things are looking pretty bleak from the perspective many people have right now, but this is America and there’s a good chance we’ll come out of this period smelling pink, too.