The Recession Hits Home

Ronald Reagan famously described the distinction between a recession and a depression as follows: “A recession is when your neighbor loses his job. A depression is when you lose yours.”

Right now, a few more economists might be willing to use the D-word.

The “help wanted” publication for Ph.D. economists is sporting a brand new section: suspended or canceled listings. It isn’t pretty. Over 30 job listings from the past few months have already been canceled, and plenty more universities never even listed an ad. And this doesn’t even count all of those who are in a “hiring frost” instead of a “hiring freeze,” or rumors of further cutbacks.

It is going to be a tough few months for newly-minted econ Ph.D.’s. And the long-run news is also grim: An intriguing study published a few years back by my former Stanford colleague Paul Oyer suggests that graduating in a downturn results in a lower-prestige initial job.

Worse, the consequences persist throughout your career, partly because research productivity is determined by the quality of your colleagues. My advice to those aspiring economists worried by all this is simply to keep your heads up. The best strategy for getting a job in a recession is exactly the same as in a boom — do good research, and be tenacious.

While some cost-cutting is inevitable given what has happened to university endowments, I think the extent of these cutbacks is probably myopic. It is rare to see so few employers competing over such an amazing pool of talent. Any dean worth his salt should expand hiring today, and cut back a bit during the booms when talent is scarce.

I wonder if other employers in the “real world” are also seeing the same incredible hiring opportunities that I currently see in the economics market.

Bobby G

"It is rare to see so few employers competing over such an amazing pool of talent. Any dean worth his salt should expand hiring today, and cut back a bit during the booms when talent is scarce."

I couldn't help but notice you said this, endorsing confidence that there is no failure in the labor market, even for PhD economists, and that there are incentives for employers to snatch up under-valued talent in times of hesistant hiring. I completely agree.

Yet just the other day I wrote up a blog post of my own in response to one of Mr. Paul Krugman's posts discussing Obama's policy of subsidizing the wages of new hires for employers. I hate to bring politics into a non-political but otherwise interesting post here, but I couldn't help but think, like you, that despite the recession the labor market will recover with the need for government interference.

So to answer your last postulation, "I wonder if other employers in the “real world” are also seeing the same incredible hiring opportunities that I currently see in the economics market," apparently our government not only thinks not, but they also think that those employers are permanently incapable of seeing those opportunities and that we need currently-employed taxpayers to subsidize all new-hires now. Sounds like they don't trust us with our own money.



I think my school sees the opportunity. After we managed to fill only one of two open positions last spring, a new spate of candidates has started showing up over the last few weeks. With luck, we'll have another new prof next spring or fall now that bigger, better known schools are pulling back on the hiring.


Sure, but the situation is a lot like my own. I see investment opportunities out there all over the place. The only problem is: I don't have any money! What are all these businesses going to pay the new hires with if they don't have money to pay them? What should they do, take out credit?


You know, I too often hear economic principles that are devoid of compassion or equality. It seems that a proven theory is sufficient justification for a course of action or thought.

Perhaps unemployed economists will think more about the trade-offs when talking about markets, channels, efficiencies, and incentives.

This post is the perfect example. Theorists place great value on the positive incentives that are created by this poor economy. That seems totally insane to me.


Welcome to the world of English majors...


@ TonyD

Why is it insane? If more people thought like this, it would benefit the economy by creating new jobs at a time when vast numbers of people are getting laid off.

sean samis

I have some questions about our current Recession: is it unusual that we didn't know for a year that we were in a recession?

I saw a graphic recently that included the statistic that since WWII,the average length of recessions has been only about 10 months.

It took 12 months to discover our current recession; has it been normal to confirm recessions only after they are over?

If it takes a two months longer than the length of the average recession to confirm them, the answer should be "yes' (at least since WWII).

If not, why did it take so long to confirm this one?

Should I be suspicious that it was deliberately not reported until after the Elections?

Or was that just a coincidence?

Coincidences happen, but they should never be assumed.


I thought this view on the situation was quite refresheing; I had never thought about it this way. However, it does make sense. During a boom, there are numerous people getting jobs, several of which lack talent and skill. On the other hand, during a depression, there is a chance to really weed out those who are the most talented from those who are not.
Though the question still remains, how will they new employees be paid? Will old ones be fired? Will they have to take credit? The idea raises several questions but still provides a new take on an old situation.


I can testify that some companies are trying to snap up talent.
I work for a financial services company, and we are hiring a large number of software developers, to the point of having employees come in on the weekends and stay late to do interviews.
Of course there is the flip side, what about the employess we get that are TOO good, for our comparatively banal programming problems? Will they leave for a more interesting work two years when the market is better, just at the point they becoming truly productive.

Johnny E

If they're so good at economic theory they should make great entrepreneurs so let them start their own businesses.

Like my Business 101 teacher said, no matter how bad the economy is there's always room for a good salesman.


The economy works in a cyclical way, that is, there are times of downfall and then times of expansion. Clearly, this is a time of downfall, but I believe graduating economists should not fear because after a while things can only get better, right? Maybe the best jobs arent available at the moment but with the wits of people who are knowledgeable in regards to the market, they really cant fail all the bad.
Perhaps the benefit of this large pool of scholars is that each individual will be working to the maximum potential in order to attain the most profitable jobs. Thus, new ideas will arise that will eventually usher the market into the profitable direction.

boston girl

I do not believe this crisis is part of the so-called economic cycle. The United States became wealthy because of the values of the past generations-hard work and patience for just rewards; and the resources to achieve were there for the taking. Now the world is becoming global and everybody is competing for dwindling energy resources, land for growing food, forests for cutting trees and so on. At the same time the American people are now of the belief that one could be rich by moving papers without actually producing anything, without actually accomplishing something and they all want this tomorrow or the next day. The yearning for great wealth has spread to too many people. An analogy with the weather, storms are cyclical, catasthropic events are not. We are in a catasthropy, and we don't know yet how devastating it is.

Joe Green

JW said, "research productivity is determined by the quality of your colleagues." Is this conjecture or grounded in empirical support that is able to identify the effect of colleague quality?


The remedy here is to get rid of tenure; Get rid of the old blood that haven't produced anything in years and are just sitting there secure in their jobs and with the salary savings bring in the new blood. Tenure has morphed into job security, from what it was originally designed to do.

Real world employers do not deal with tenure. Real world employees have to produce.

If tenure in schools, from the grammar schools to the colleges and universities, was eliminated, there would be boundless opportunities for all you new PhD's because there will be that simple economic concept of competition.


Actually, I believe it was Truman who first said 'it's a recession when your neighbor loses his job, it's a depression when you lose yours.' Reagan modified it by adding the Carter punch line, but the core quote you cite was first uttered by Truman.

I'm surprised no one has corrected this already.


Different things are seen as 'the scarce resource' in boom time and in recession. During the boom, it's talent that is scarce, and during recession it's funding for positions that is lacking.

Employers "in the real world" value funding over talent right now.


When large financial institutions (a la Citibank) lay of large numbers of employees while getting government aid and summarily suing their struggling debtors its a recession.


It's a recession when your neighbor loses his job, a depression when you lose your job, and a catastrophe when your wife loses her job.