A Long Economic Slog

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A paper presented at this year's American Economic Association meeting in San Francisco looks at past financial meltdowns to gauge just how bad America's recession looks. The study observes 14 banking busts such as the Depression, the 1970s crisis in Spain, Norway in 1987, and Finland, Japan and Sweden in the early 1990s. It also compares severe recessions in the developing world with seven emerging-market economic crises.

The news isn't good. It's downright gloomy. The Economist reports the findings:

... unemployment in America is set to rise to an alarming rate of 11-12% in coming years. The housing bust is unlikely to end quickly either. House prices take an average of five years to reach their nadir and fall by 36% in real terms. Equities take less time to reach rock bottom but lose more than half of their value by the time they get there.

Conventional wisdom in the franchise industry says that when credit returns, the unemployed will turn to small business, franchises and business opportunities in droves. For the industry, it looks like there will be a deep pool of unemployed that will take years to thin out. According to the study, 401k and retirement funds will be one of the first things to return in value in a few years time. That is helpful to provide confidence to invest in franchises, and in some cases to actually fund franchise purchases.