One way to look at this is to examine the trajectory of employment relative to December 2007 levels (when this recession began) and compare it with the average trajectory of relative employment in other recessions:
A more apt comparison might therefore be the “bad” recessions of recent memory, the 1973–75 and 1981–82 episodes, which both lasted sixteen months.
Here, for your viewing displeasure, are those comparisons:
The trajectories suggested by the relatively long-lived, more severe recessions of 1973-75 and 1981-82 are almost certainly more sensible comparisons at this point. And, as bad as it is right now, we are still a fair distance from the pace of relative employment losses in those episodes.
This is an interesting observation and it helps to put the current situation in historical perspective. Let me add my own theory.
I think that what is happening in the 4Q of 2008 and the 1Q of 2009 will be the "tear the band-aid off quickly to get it over with" wave of layoffs. Here is a graph of job creation for the last 10 years:
Click for a larger image
The best read of job creation for the latest expansion is 8.2 million jobs (from 129,822,000 in August 2003 to 138,078,000 in December 2007). This figure alone is very important. It tells us that job creation was low. Why? My personal thesis is that companies have become incredibly streamlined over the last 30 years; in general they now only hire when it is absolutely essential. As a result total job creation is decreasing for expansions. This is the natural result of the productivity increase we have seen over the same time.
So far this year we've lost 1.9 million jobs or 23% if all jobs created during the latest expansion. The worst rate of job losses for a recession over the last 60 years is about 50% in a recession that occurred in the 1950s. So, we're about halfway there. For the US to get to the 50% mark we need to lost about another 2.1 million jobs. Assuming a 250,000 - 500,000 rate per month, that means we have about another 3-6 months of ugly job losses to go.
After that my hope is we see a big fiscal package approved to start pumping money into the economy. This will make the 4th quarter a fair but not great half year.
I could be wrong in all of this. The economy likes to make an ass out of economists -- and actually does so with alarming frequency.