Beware of Chart-Junk! Debunking Speaker Pelosi's Scary Graphic
Although U.S. job losses in January 2009 are certainly painful, I believe this image deserves the Edward Tufte moniker "chart junk" because it is (deliberately?) misleading, although technically accurate.
First, there are more Americans employed today than there was in either 2001 or 1990, the dates on this chart. Therefore, these absolute numbers do not reflect relative values, the ratio of employed to unemployed workers. In fact, this chart in the National Review suggests that the rate of job loss (the slope of the unemployment curve) is consistent across recessions.
The need to normalize the data across time is real, whether we are talking about the cost of things (dollars) or number of people in the work force. Demonstrating the power of access to data plus easy-to-use charting tools and web hosting services, a few citizens did just that in response to that misleading chart. Eventually, so did Time's Swampland. (Shouldn't journalists have known better from the get-go?)
Second, both the 1992 and 2001 recessions were relatively mild, in terms of overall unemployment rates. The granddaddy recession since 1948 occurred in 1982, when unemployment hit 10.8%. Thus, even if the Speaker's office had chosen to use relative, not absolute, numbers to make her point, her chart would still be misleading because of the time period chosen.
That said, in all other post-WWII recessions, unemployment has peaked at less than 8%, so this recession looks like it will be at, a minimum, the second-worst since WWII.
Third, notice that the economy is cyclic. We move towards full employment, then we lose jobs. We move towards full employment, then we lose jobs. Rinse and repeat. The cyclic nature of the economy is why some analysts (and economists) advise Congress to do nothing.
Also, as the cyclical nature of the economy illustrates, past government efforts to "stimulate" the economy out of recession have been, at best, only marginally successful. Mike Moffatt, About.com guide to economics, argues that any fiscal stimulus proposal is unlikely to work in the real world:
Fiscal stimulus works very well in mathematical models where all real world difficulties are assumed away. They tend to be popular with politicians, who get a justification to spend money, and economists with little life experience outside of academia. When we consider the stumbling blocks that occur in practice, the stumbling blocks that are ignored in the mathematical models, fiscal stimulus looks far less attractive.
Finally, let's think about the similarities between the 1982 recession and today. Both followed a recession from which the economy had not completely recovered (although today's recovery is better than the one in the 1980s, based upon unemployment rates). And both involved failed financial systems (then, Savings & Loans, today AIG et al). Yes, there are reasons to be concerned.
Nevertheless, the next time you encounter a chart that is heart-stoppingly scary, ask yourself why you are having that response and if the response is justified by the facts. As we all know too well, FUD (fear, uncertainty and doubt) is the number one tool for sales (both cars and ideas) in America.