Every hospital room, doctor’s office, and ER bay has a faded copy of the Universal Pain Assessment Scale taped to the wall: it’s an annoyingly reductive approach to “measuring” a patient’s level of misery — which is obviously an important diagnostic and clinical task, but as a patient or loved one I’d rather not have the comparison to happy, glum, sad, and horrified faces.
This is the image that popped into my head when I read the Fabricators & Manufacturers Assn.’s announcement that their economic analyst believes the current recession is “less ‘painful’” than those in the past.
In fact, Dr. Chris Kuehl predicts that recessionary conditions will ease later this year. “Unless the current doom and gloom becomes something of a self-fulfilling prophecy, the recession is on a par with past downturns and real improvement will start to manifest itself in 2010,” Kuehl writes in the FMA’s economic-update newsletter.
His analysis is based on the National Bureau of Economic Research’s data analysis technique — the standard used in business reporting — which is that overall economic growth must decline for two consecutive quarters in order to define a recession. Once the decline reverses for two quarters, the recession is over.
“The NBER has a reputation as being pretty conservative and reacts to factors beyond GDP to declare a recession,” Kuehl says. “It uses six criteria to determine when a recession has started and when it ends. These are GDP, real income, employment, industrial production, wholesale sales and retail sales.”
Kuehl’s analysis of government data on GDP, income, unemployment, and production since 1970 leads him to conclude: “It is pretty apparent the recession of 2008-09 is not worse than those in the past four decades. In fact, the recessions of the 1970s and 1980s were arguably more painful on almost every level.
“For example, real GDP dipped lower in 1975 and 1980, and unemployment rates were higher in 1981-82,” he adds. “The statistics also show that although this is no shallow and unimportant recession, it isn't the worst we have been through – not by a long shot.”
I hope he’s right. But, just like the diagnostic chart there’s a lot of room for misinterpretation here. The NBER was widely criticized in early 2008 for relying so strictly on data that it didn’t recognize accelerating recessionary conditions. Nor does the NBER account for regional declines in its statistics, which may make the recovery from recession more difficult in some industries than others.
Most important, the NBER scale does not seem to incorporate anticipated developments — e.g., proposals for taxing carbon emissions — in the decisions businesses make that might prolong or suppress a recession. In short, there’s no way to measure anxiety.
“To those who are frantically trying to hold their business together, the recession is as bad as it gets,” Kuehl says. “But, for those who are trying to decide how radical they need to get to protect their business, a realistic assessment is needed. At this stage, the recession is on a par with what has been endured previously, which means it can and will be survived.”
Let me repeat: I hope he’s right.
“The strategy now should be to hunker down and wait out the downturn – without taking steps that gut a company's ability to react to the turnaround,” Kuehl says. “This means hanging on to valued employees who soon will be needed again. It means making those investments in capital goods that keep a company competitive, and it means staying true to strategic goals in marketing.”