Q4 2008 Arguably Worst Since 1930s
(WSJ) Market Watch:
Worst quarter for the economy since the 1930s
In terms of lost wealth, lost jobs, falling output, the fourth quarter stands out
Now that the books are closed on the fourth quarter's performance, it's fair to say that the final three months of 2008 will go down as the worst quarter for the U.S. economy since the 1930s.
In terms of the things that matter most -- output, income, wealth, profits, foreclosures and job growth -- the fourth quarter was a disaster.
If you look at each of those categories in isolation, we may have seen worse on rare occasions, but when you examine the big picture, it was the worst since the Depression.
Aside from the creative destruction that will ultimately lead to a growing economy, just about the only positive development was the rapid decline in energy and commodity prices.
The Commerce Department reported Thursday that output fell at a 6.3% annualized rate in the fourth quarter, the biggest drop since 1982 and the third worst gross domestic product figure in the past 50 years.
The decline in real GDP wasn't due to just one factor. Every major sector of the economy contracted during the quarter, except the federal government. Consumer spending, business investment, residential investment and exports all fell at shocking pace.
Real gross domestic income fell even faster than GDP, sinking at a 7.6% annual pace in the quarter. That's the worst since 1980 and the second worst in the past 50 years.
Corporate profits from current operations plunged by a record $250 billion, or 16.6% at a quarterly rate, the largest percentage drop since 1953. The drop in profits doesn't even include the massive write-downs by the financial corporations on their bad debts.
Individual disposable incomes dropped at a 2.3% annual pace, also one of the biggest declines in the past 50 years. Luckily, however, falling prices boosted people's purchasing power.
Falling prices at the store or gas pump may have been a godsend, but falling prices in the stock market and real estate markets were ruinous for households in the fourth quarter.
Households lost $5.1 trillion in wealth. Household net worth plunged at a staggering 31% annual pace, about twice as fast as ever before recorded in the Federal Reserve's flow of funds data, which date back to 1952. See full story.
Businesses also lost tons of money. For incorporated businesses outside of the financial sector, net worth fell $572 billion, or a 14% annual pace. For non-incorporated businesses, the loss was $500 billion, or a 29% annualized decline, the worst ever.
The unprecedented loss of wealth is what truly separates the fourth quarter of 2008 from other post-war recessionary periods.
The people didn't just lose money; they also lost jobs and houses at a rapid pace.
New foreclosures of homes flattened out in the fourth quarter at about 1% of outstanding mortgages, largely due to moratoriums on new foreclosures. But the number of mortgages that were at least 30 days behind rose to a record 7.9%. More than 11% of mortgages were either in foreclosures or behind at least one payment. That's the highest on record. See full story.
About 1.28 million payroll jobs were lost in the fourth quarter, a number that has been exceeded only once since the 1930s: in 1945 when 1.35 million lost their jobs after the Allies defeated Japan in World War II. See full story.
To be fair, the economy is much bigger now than it was then, so the losses last quarter don't represent the same proportion of workers. But as a percentage of the workforce, job losses in the fourth quarter rose to 0.9%, the second largest loss in 50 years. (And beware, the first quarter of this year is shaping up to be much, much worse, with nearly 2 million jobs expected to be lost, or about 1.4% of those with jobs.)
Rex Nutting is Washington bureau chief of MarketWatch..
Worst quarter for the economy since the 1930s
In terms of lost wealth, lost jobs, falling output, the fourth quarter stands out
Now that the books are closed on the fourth quarter's performance, it's fair to say that the final three months of 2008 will go down as the worst quarter for the U.S. economy since the 1930s.
In terms of the things that matter most -- output, income, wealth, profits, foreclosures and job growth -- the fourth quarter was a disaster.
If you look at each of those categories in isolation, we may have seen worse on rare occasions, but when you examine the big picture, it was the worst since the Depression.
Aside from the creative destruction that will ultimately lead to a growing economy, just about the only positive development was the rapid decline in energy and commodity prices.
The Commerce Department reported Thursday that output fell at a 6.3% annualized rate in the fourth quarter, the biggest drop since 1982 and the third worst gross domestic product figure in the past 50 years.
The decline in real GDP wasn't due to just one factor. Every major sector of the economy contracted during the quarter, except the federal government. Consumer spending, business investment, residential investment and exports all fell at shocking pace.
Real gross domestic income fell even faster than GDP, sinking at a 7.6% annual pace in the quarter. That's the worst since 1980 and the second worst in the past 50 years.
Corporate profits from current operations plunged by a record $250 billion, or 16.6% at a quarterly rate, the largest percentage drop since 1953. The drop in profits doesn't even include the massive write-downs by the financial corporations on their bad debts.
Individual disposable incomes dropped at a 2.3% annual pace, also one of the biggest declines in the past 50 years. Luckily, however, falling prices boosted people's purchasing power.
Falling prices at the store or gas pump may have been a godsend, but falling prices in the stock market and real estate markets were ruinous for households in the fourth quarter.
Households lost $5.1 trillion in wealth. Household net worth plunged at a staggering 31% annual pace, about twice as fast as ever before recorded in the Federal Reserve's flow of funds data, which date back to 1952. See full story.
Businesses also lost tons of money. For incorporated businesses outside of the financial sector, net worth fell $572 billion, or a 14% annual pace. For non-incorporated businesses, the loss was $500 billion, or a 29% annualized decline, the worst ever.
The unprecedented loss of wealth is what truly separates the fourth quarter of 2008 from other post-war recessionary periods.
The people didn't just lose money; they also lost jobs and houses at a rapid pace.
New foreclosures of homes flattened out in the fourth quarter at about 1% of outstanding mortgages, largely due to moratoriums on new foreclosures. But the number of mortgages that were at least 30 days behind rose to a record 7.9%. More than 11% of mortgages were either in foreclosures or behind at least one payment. That's the highest on record. See full story.
About 1.28 million payroll jobs were lost in the fourth quarter, a number that has been exceeded only once since the 1930s: in 1945 when 1.35 million lost their jobs after the Allies defeated Japan in World War II. See full story.
To be fair, the economy is much bigger now than it was then, so the losses last quarter don't represent the same proportion of workers. But as a percentage of the workforce, job losses in the fourth quarter rose to 0.9%, the second largest loss in 50 years. (And beware, the first quarter of this year is shaping up to be much, much worse, with nearly 2 million jobs expected to be lost, or about 1.4% of those with jobs.)
Rex Nutting is Washington bureau chief of MarketWatch..