It’s become all the rage right now to compare our current coronavirus-driven downturn to the Great Depression. 

Just take headlines like this from the Atlantic – “The Second Great Depression” – or this from the Seattle Times, “The Depression shattered and changed America – now history may rhyme.” 

“There are many ways this feels more like the Great Depression,” Kenneth Rogoff, a Harvard economist, told Bloomberg in May during what may – hopefully – turn out to have been the darkest days of the crisis.  

Closer to home, I’ve also at times hopped on the bandwagon as well, more than once comparing the size and scale of the current crisis to the granddaddy of them all, which will mark its 91st anniversary this fall. 

Now, who am I to contradict a Harvard paladin. But recent events – and a closer look at what actually happened during the Great Depression – provide some rays of hope in this otherwise almost unbearably gloomy picture. 

Jobs, Spending Still There 

Key economic indicators, instead of continuing to crash through the floor as they did in late March and May, have proven to be remarkably resilient. 

First off came the surprising May jobs report. While many economists were predicting a further round of losses, the U.S. economy instead regained 2.5 million jobs. 

That was followed by another, surprisingly strong jobs report for June – another 4.8 million jobs added. 

Consumer spending also posted a strong comeback in May, rising a record 8.2 percent while home prices, contrary to many predictions, have continued to rise, with no let-up in bidding wars in the hottest markets.  

And the unemployment rate, which just a few months ago some feared would reach or surpass the jobless rate of nearly 25 percent in 1933, has fallen to just over 11 percent. 

That may be artificially low given mysterious, unprecedented and frankly fishy data problems the Trump Administration’s Labor Department has encountered as of late tabulating the jobless numbers, but there’s a limit to how much the books can be cooked, and 11 percent is still a long ways off from 25 percent. 

Yes, I can hear you interjecting right about now to point out the big surge in coronavirus cases in Sunbelt states, which could derail economic reopening plans across the country. 

We’ll have to see how it all plays out, though simply requiring everyone to wear a mask could put a dent – maybe even a big one – in those numbers. 

The federal government already has many tools in place it didn’t have until late in the Great Depression, if at all, meaning this downturn may not be as bad.

We Know How to Fix This 

But the coronavirus resurgence also highlights, in a strange way, a reason to hope that we may be dealing with a short but sharp downturn, and not repeat of the prolonged, decade-long quagmire that was the Depression. 

Many economists have theories on what caused the Great Depression, but nearly a century on, there is no simple explanation and certainly no definitive answer. 

There were contributing factors: rampant and uncontrolled speculation in the stock market, a collapse in agricultural prices and the eventual implosion of the banking system. 

But how all these – and many other factors – all came together to create the worst economic catastrophe in American history is still a subject of intense debate. 

Unlike the Great Depression, we know why economic activity fell off a cliff – it goes by the name COVID-19 – and just how to fix it, even if the other, red-state half of the country has yet to come to the same conclusion. 

Case in point, the surprising rebound in jobs and consumer spending in May came as states began to reopen and, maybe as importantly, as businesses and consumers adjusted their ways of doing things to the new normal. 

In addition, we have the benefits of hindsight and historical lessons learned that, for now at least, are keeping at bay an even bigger economic disaster. 

Decentralized and far weaker organization than today, the Fed during the late 1920s and early 1930s raised interest rates and failed to take effective action to stop bank runs, to name two very big mistakes. 

By contrast, the Federal Reserve under Ben Bernanke, a scholar of the Great Depression, played a key role in pumping liquidity into the global markets during the financial crisis back in the fall of 2008, heading off a much more damaging collapse. 

Under Jerome Powell it has continued in the Bernanke tradition, helping prop up the national and global economy by keeping the supply of money and credit flowing. 

That, in turn, has helped keep the banking system in fairly good health, with no signs, at the moment at least, of the kind of collapse that proved so devastating to the hopes of recovery back in the 1930s. 

 Not Starting from Zero 

Congress, and our nation’s political culture, is also far different than it was in those now long distant years, especially when it comes to spending money to help the unemployed and keep the economy afloat. 

The Republican-dominated Senate, to its credit, joined together with the Democratic-controlled House to pass a multi-trillion-dollar rescue package. 

The big debate now is whether to keep the extra $600 a week in jobless payments, which have topped off the routine but less substantial payments workers typically get under state-administered programs. 

Scott Van Voorhis

Back in the Depression, it took the coming of President Franklin Delano Roosevelt for the nation to pass an unemployment insurance program, and that was in 1935, six years after the crisis first hit. 

That hardly means its smooth sailing ahead, or that the economy, in the immortal words of President Donald Trump, will takeoff “like a rocket ship.” 

But I will take a recession any day – even a sharp one – over a repeat of the Great Depression. 

Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.