Despite the games being played regarding Obama’s stimulus package, I think it’s wise to anticipate time delays between money authorized, money spent and desired results achieved.

‘They’ say this is nowhere near as bad as the Great Depression. So far, they’re right. It’s not even as bad as the second worst period, in 1982, when unemployment peaked at 10.8%, midway through Reagan’s first term. We also don’t have a Dust Bowl compelling mass regional migrations and we’re not yet seeing a repeat of the soup kitchens and Hoovervilles of the 1930s.

Then again, ‘they’ also anticipate it’s going to be worse this year, and a few economists are looking at 2010 as the potential peak of unemployment. Joblessness traditionally continues rising, even after a recession is officially over.

So let’s take a look at some hard numbers to see if we can find more direct comparisons. Here’s the December 2008 unemployment statistics for the 16 largest states, which serve as homes to 2 out of 3 Americans today.

National unemployment rate: 7.2%

CA 9.3%
TX 6.0%
NY 7.0%
(26% of the US population lives in those three states.)

FL 8.1%
IL 7.6%
PA 6.7%
OH 7.8%
MI 10.6% (worst in the country)
GA 8.1%
(50% of the US population lives in those nine states.)

NC 8.7%
NJ 7.1%
VA 4.6% (in Nov 08; Dec stats unavailable as yet)
WA 7.1%
AZ 6.9%
MA 6.9%
IN 7.1%
(67% of the US population lives in those sixteen states.)

The lowest unemployment rates are currently found mostly in sparsely populated rural areas like Wyoming, Nebraska, Iowa, the Dakotas, Utah and New Mexico. Another pocket of low unemployment can be found in the Virginia and Maryland suburbs where many federal government employees reside.

VA 4.8% (in Nov 08)
DC 4.4% or 8.0% (in Nov 08)
MD 5.3% (in Nov 08)

But it’s the national trend that really has analysts alarmed.

From the January 10th LA Times:

The nation’s unemployment rate rose to an eye-popping 7.2% in December and brought the total jobs lost for the year to the largest number since 1945, the Labor Department said. More alarming than the bare numbers was the trend line: The economy has lost 2.6 million jobs in the last 12 months, but 75% of them vanished in the last four months, with 524,000 jobs lost in December alone.

And let’s pay attention especially to how the counting differs:

More than 11 million American workers — roughly 1 out of 14 — are unemployed and actively looking for new jobs, according to the Labor Department. An additional 8 million are working part time even though they want full-time work, and 1.9 million were out of work and either too discouraged to keep looking or had refocused on school or caring for family.

“Factoring in discouraged workers, unemployment is closer to 9.4%,” said Peter Morici, an economist at the University of Maryland. “Add workers in part-time positions that cannot find full-time employment and the hidden unemployment rate is 14.5%.”

Using similar multiples as Morici defines, if the modern official rate reaches 12.4%, the hidden unemployment rate would be 25%, or roughly the same as the Great Depression, which peaked at 24.9%.

Before the election, economists predicted we could reach 9% next year. Shortly after, a few started suggesting 10% could be the 2009 peak. That’s when I began projecting a minimum of 12% at the peak, which could occur as late as the summer of 2010. We will break the 1982 record. We will be dealing with another Depression, though few will call it that for fear of spooking more pessimism.

Why am I so pessimistic about unemployment rates? History. The second year of FDR’s presidency is when unemployment peaked. The second year of Reagan’s presidency also saw unemployment peak. So why should we expect Obama’s response to the economic crisis resolve things any quicker than that?

Additionally, though the greed of mortgage lenders - and the impact of their lobbyists on elected officials - precipitated the housing crisis that led us into the current mess, other factors were clearly in play. I’ve maintained for years that the retirement of the leading edge of the Baby Boomers was bound to create a recession. Sunbelt migration and the purchasing of retirement homes has been driven by that generation and the first Boomers reached early retirement age (62) in 2008. Those earliest Boomers who wait to 65 will reach that age in 2011. So I predicted a roughly 3 year period of distress would occur, followed by a much slower rate of homebuilding than has occurred in the past 15 years.

A second major factor was the War on Iraq. I predicted an oil price spike with excessive speculation would accompany that. And Obama’s current timetable of a 16 month withdrawal means an end to that in late May 2010. Since speculators bet one way at least 6 months ahead of an anticipated outcome, oil speculation should remain downhill till December 2009, other than the minimal seasonal rise that typically occurs between December and May annually.

So the convergence of these three factors - excessive greed and speculation in housing and oil plus the Baby Boomers retiring - spells the difference between a recession and a depression. So does the fact that this is a global recession, with new giant economies like China and India involved.

It’s a fool’s game to try and time the market exactly, but as near as I can estimate, either May to July of 2010 is when unemployment will peak, or December 2010 through February 2011. And, to reiterate, I predict it’ll peak at 12% or better, with the hidden rate in the vicinity of the last Depression’s 24.9% yearlong pinnacle.

And the Depression offers the best lessons for the ultimate remedy: Keynesian deficit spending. Back then, Sweden and Germany were the first two to utilize that and became the first to recover, as well. Theoretically, if Obama can drive the spending to a peak quickly, the misery peak will come sooner. But knowing how Congress typically acts, it’s more realistic to anticipate a succession of bailout packages, before this tide of pessimism is turned.

From the same LA Times article cited above:

Still, economists generally expect this recession, which began in December 2007, to be the longest since the Great Depression. The two longest recessions of the postwar era — 1973-75 and 1982-83 — each lasted 16 months. (The deepest quarterly contraction of the postwar era was a 10.4% decline in gross domestic product in the fourth quarter of 1958.)

The unemployment rate is still far from the levels of the Great Depression, when more than 20% of American workers lost their jobs, as well as of the shorter but deep recession of the early 1980s, when unemployment reached 10.8% in 1982.

The report was full of ill portents nonetheless. For one thing, the average number of weekly hours worked dropped to 33.3 per worker. That’s the lowest number since the Labor Department began keeping track in 1964. Businesses tend to cut hours before cutting workers, suggesting that more layoffs are pending.

“We’re seeing a complete unraveling of the labor market and are on track for getting beyond 10% unemployment,” said Lawrence Mishel, president of the left-leaning Economic Policy Institute in Washington.

And:

Morici said that without a massive government stimulus program, the economic downturn would last a long time.

“This will prove to be a depression if we don’t act quickly,” Morici said.

“The economy is not in a self-correcting mode. Recessions self-correct, but depressions do not.”

Although momentum is growing for a massive relief package, Democrats and Republicans and some factions in both parties are at odds over just what measures to include and how large they should be.

House Minority Leader John A. Boehner (R-Ohio) expressed support for some kind of a stimulus program but said it should emphasize tax cuts, not government-funded job programs and other spending.

“America cannot buy its way to prosperity with more and more government spending,” Boehner said in a statement.

I’ll be putting a lot of focus on the economy here in coming weeks and months. I even intend to interview folks who lived through the last Depression to see what we can glean to help us through this one.