Here are the worst past recessions from the US National Bureau of Economic Research:
- 1929-33: 43 months
- 1910-12: 24 months
- 1913-14: 23 months
- 1920-21: 18 months
- 1973-75: 16 months
- 1980-81: 16 months
I'm old enough to remember the 1980s recession and every recession since. Some of you may remember the 70s oil-shock recession....I was around but too young to remember. On paper this is a deep harsh recession, the worse since the Great Depression. You can compare all the post-war American recessions here. The US unemployment hit 9.4% and is almost certain to get to double digits. For Singapore, the numbers from first quarter has been shocking - the decline in Q1 2009 was the worst quarter ever since Singapore became independent. Manufacturing shranked by 29%....you can read a good summary here. So going by the numbers this is clearly the worse recession since 1933.
Observing people and behavior, I notice, given the severity of this recession, there is something unsual going on. I notice there is a lack of fear among many people compared with other recessions. Among my friends a few were fearful for a few weeks when there was direct and clear risk that they will be retrenched but after that their fear disappeared. I observe that level of fear was far higher in the 80s, 1998 and 2003 recession. Someone observed and posted in the comments section of my blog that people are still spending, shopping centers seems to be as crowded as before and restaurants appear to be doing well etc like nothing bad is happening. Taxi drivers I spoke to tell me that business is off the high but not catastrophic....in the 2003 recession quite horrible for the taxi business....people just cut back until taxi drivers were better off giving up driving because they can't overcome the rental. I remember walking around in empty shopping centers, eating in empty restaurants in past recessions. What is going on? I thought about it for sometime and I think I have the answer.
In the 1980s, the way people were employed to do work was completely different. When you join a company, there was a good chance you would stay for a decade or longer. The Japanese companies more or less were still practising lifetime employment and the attitude was to keep workers "come what may". So when companies go bust in the 80s recession, you're laying off people who had been in the company for decades and that was really painful. In the 80s recession, when the company was not doing well workers were really worried because they had been employed for years in the company and looking for another job was something they did not expect to do. Over the next 2 decades, jobs security vanished as companies adopted hire-and-fire policies. IT professionals now are used to 2 or even 1 year contracts. When contract ends, the companies have the option not to renew it to cut costs and retrench people. Many of my friends have had 4-5 jobs over the last 10 years. Looking for another job has become routine for many people so is the experience of losing a job. The only difference between the good times and bad for many younger people is the time it takes to find a job and the income. As there was already 2 recessions before this one in the last 10 years, more people became used to the lack of job security. There is still fear now among people in their 40s in 'unstable' jobs but this fear is existed in the good times anyway so people learn to live with it, hedge against it with backup plans and so on. For the bottom 20%, living in relative poverty, life has been miserable throughout the good years the threshold for pain has probably increased and diminishing expectations of a better life makes this recession just another bad thing that happened to them in a long struggle to stay afloat in Singapore.
Bad things happen often enough people get used to it. It is still just as painful when bad things happen but people are not paralysed by the fear of it happening. This is the 1st time ever that we see prices for HDB flat going straight up to new highs during a recession and COE rising as unemployment goes up. While I've explained that immigration might have something to do with the rising demand but to push prices to record levels during a recession requires a lack of fear. We see the same lack of fear in the private property market - since February 2009, buyers have snapped up as many units each month as in 2007 [Link].
The willingness of Singaporeans to continue to spending will do little to take us out of recession. We are still dependent on western economies for demand and growth. The unemployment rate stands at 4.9% and is still rising, the pain of being unemployed for an extended period is still the same regardless of whether there is fear of it happening or not....