Is the Economy Worse off than in 2008?

If you have been following the headlines now and were three years ago during the financial crisis, it’s hard not to make the comparison. The stock market is swinging wildly. Financial CEOs are taking to the airways to publicly attest that their banks have enough capital. And investors are increasingly worried about a debt crisis. Here we go again.

There are, of course, differences. The debt crisis people are talking about now has to do with government debt, not housing. And the source of the real worries are Europe, not the U.S. What’s more, economic activity has been pretty weak for some time. So if the economy falls into a double dip recession, which economists say is a growing risk, we won’t see the steep drop off in economic activity that we saw in mid-2008. Nonetheless, the period of slow growth that we have had for the past two years makes the economy vulnerable in other ways.

(PHOTOS: The Global Financial Crisis)

People who have brushed off the comparison between now and 2008 have mostly said that markets are not in as much stress as at the height of the financial crisis. But that’s not really a fair comparison. We’re not at the height of any financial crisis now. The real comparison is between now and just before the financial crisis – early August 2008. And in many ways it appears we may be at least as bad or worse off than then. Let me count the ways:

First off, take a look at the stock market, which generally is a pretty good indicator of where the economy is headed. You may have noticed it has been falling recently. And you probably remember that stocks crashed back in 2008. But by early August, most of the damage of the 2008 stock wrought had yet to be done. Back then, the S&P 500 stood at 1296. That’s higher than it is today at a recent 1121. What’s more, the most recent peak of the S&P 500 was in April. Since then it is off around 17%. Back in 2008, the market was also down 17% from its high by early August, but that was off a peak that was set in October. So the market drop off has been more swift this time around. And volatility, another sign of market weakness, is much higher now than it was in early August 2008. Back then the volatility index, or VIX, was at 19. Today the VIX is at 42. Generally a higher VIX means people are more nervous stocks will fall.

(SPECIAL: 25 People to Blame for the Financial Crisis)

But while the stock market sell off is similar to 2008, the job market today is significantly worse off. Back in August 2008, we had an unemployment rate of 6.1%. Today the rate is 9.1%. The question, though, is which directly the job market is headed. Back then the job market was clearly deteriorating. These days it’s not as clear. On Thursday, the Labor Department announced that in the first week of August an additional 395,000 workers lost their jobs. That’s a big number. But it was a slight improvement from a week ago. Still, more than two years after the official end of the recession, hiring remains weak. And the number of people who have been who have been out of work for more than a year is significantly higher than it was back in 2008. With no extension of unemployment likely anytime soon and the emergency funds of the long-term unemployed likely tapped out, we could see further drops in consumer spending.

How about the banks? Most analysts say financial institutions, particularly U.S. ones, are in a better position than they were back in 2008. They have more capital and are less exposed to European debt than they were to U.S. mortgages. The problem is U.S. banks have three years of bad loans that have piled up on their books, many of which the banks have yet to deal with either by modifying or writing off. And in an effort to boost profits banks have recently been reducing the dollars they put away to deal with bad loans. The result is banks, at least by one measure, look more vulnerable to having problems than they did back in 2008. According to latest data from Bankregdata.com, for every dollar of non-performing loan on their books, banks have only reserved $0.85. That’s down from a reserve rate of $0.94 back in mid-2008. For some banks, the change from 2008 is much worse. Bank in 2008, Wells Fargo, for instance, has reserves that equaled 164% of its volume of bad loans. Now that percentage has dropped to 58%. That means if the bank was forced to write-off every one of its bank loans, which is unlikely to happen at the same time, Wells would have a $15 billion loss that it has not yet accounted for. The situation at Bank of America could be even worse. Recently, investment firm Compass Point Research & Trading issued a report that said Bank of America, because of a growing number of lawsuits from investors who claim they were duped by the bank into buying worthless mortgage bonds, could still face a loss of $62 billion from home loans. That’s $44 billion above the current level of the bank’s reserves. Bank of America officials say that Compass’ loss estimate is far too high.

(MORE: Why QE3 Won’t Save the Economy)

But perhaps the biggest reason we may be worse off than in 2008 is that at this point in our economic morass, there is less policy makers can do to boost the economy. Interest rates are already near zero. And Washington, having just gone through a bruising fight to cut spending, looks unlikely to try a new round of stimulus spending. The good news, though, is that as things get worse it makes it easier for Washington to act. Who would have guessed Congress would approve the $700 billion TARP bailout program back in August 2008? By that comparison, QE3 looks rather tame.

Stephen Gandel is a senior writer at TIME. Find him on Twitter at @stephengandel. You can also continue the discussion on TIME‘s Facebook page and on Twitter at @TIME.