It’s been 10 years since Lehman Brothers filed for bankruptcy, intensifying the financial crisis and deepening the Great Recession. The collapse of one of the world’s largest investment banks contributed to the loss of nearly $10 trillion in wealth in equity markets around the globe. The United States economy was already contracting, and over the next six months about 4.5 million jobs were lost.
By the end of 2009, about 8.6 million jobs had been lost, a 6 percent decline from January 2008. It took well over six years to gain those jobs back, and some areas continue to struggle. Since the turnaround began in earnest around October 2010, the U.S. economy has added more than 18.6 million jobs (an increase of some 14 percent), pushing the current total to almost 149.3 million.
Texas fared better than the nation through the downturn, entering the recession later and emerging earlier and stronger. The state lost about 430,000 jobs between September 2008 and January 2010, a decline of around 4 percent. Texas reached its prior peak level in just over three years and has grown almost 23 percent since the turnaround began.
One reason Texas weathered the storm of the Great Recession with less damage than many areas is that, for part of the period, the energy sector was surging. During the summer of 2008, crude oil prices were topping $140 per barrel, and exploration and production activity was boosting the state economy. Technology industries were another bright spot. Texas was also benefitting from a long history of proactive and successful economic development and a strong business climate. Companies struggling in other areas through the recession looked to Texas as a location where they might expect better results. Texas also skipped the bulk of the real estate bubble (partially because Texas lenders still remember well the real estate problems in the 1980s) and had less of a problem to deal with than many markets. While the state had its share of challenges, they were more manageable than in most parts of the United States. In fact, in relative terms, the 1980s were worse for Texas than even the Great Recession.
In the wake of the collapse of Lehman Brothers and the problems many other large investment banks faced at the time, lawmakers stepped up with new requirements to try to prevent such a thing from ever happening again. (Many believe there is still work to be done while others say we have gone too far, but more on that topic another day.) Now, the economy is surpassing full employment and wages are rising. The stock market has been performing well and most indicators are that growth will continue. What a difference a decade makes.
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M. Ray Perryman is president and CEO of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.