The October 19th stock market crash spilled more printer's ink than any other economic event of the 1980s, yet by all accounts the economy hardly noticed. The real economy just kept growing. Real GNP growth actually exceeded 6% on an annual basis in the quarter the Crash occurred and has remained above 3% since. Unemployment as of September stands at 5.4%, more than half a point lower than it did on October 19, 1987. In fact, ignoring the carnage on Wall Street, the Crash's major impact may have been to dampen slightly a somewhat overexuberant economy.
Memories of the Crash of 1929 and the decade that followed are some of the most traumatic in U.S. history. Yet today, last November's rush of recession forecasts seems at best overblown. In retrospect, the reasons for this difference are actually quite simple.