Saturday, January 10, 2009

national unemployment nearly HALF as bad as 1982

Unemployment hit 7.2% in December, the highest since January 1993-- as the economy was recovering from the pseudo-recession of 1991-1992.

In November 1982, the unemployment rate was 10.8%.

Since the "natural rate of unemployment"-- the part of unemployment you can't get rid of (at least without severe long-term consequences)-- is generally thought to be 4.0-4.5%.

So, today's unemployment rate is 2.7-3.2% higher than the natural rate-- less than half of the unemployment above the natural rate in 1982 (6.0-6.3%).

And of course, we're nowhere near the unemployment of the Great Depression when the rate was in double-digits for more than a decade, including 19% in 1939-- the 6th year of the (wildly over-rated) "New Deal".

9 Comments:

At January 10, 2009 at 4:59 PM , Blogger William Lang said...

How do the unemployment levels compare if you count under-employed people (working part-time but wanting to work full-time) and persons who are not actively seeking work (discouraged job seekers, and those who have stopped receiving unemployment benefits without getting a job)? I always hear that you have to add 4% or somesuch to a given unemployment number, to arrive at a "true" figure.

 
At January 10, 2009 at 8:47 PM , Blogger Eric Schansberg said...

Good question (although it doesn't change my underlying point).

Not sure. That data is not as easily accessible. And it's also more subjective. For example, if I *say* I want to work more, why am I not doing so? (Likewise, "unemployment" is subjective too. We all know there's looking for a job-- and there's *looking* for a job.) There's also "discouraged workers" who are no longer in the labor force, and thus not counted by the govt as unemployed.

In any case, the far larger question-- when making comparisons across time-- is whether those numbers have changed much over the years. And I don't know of any significant trends in any of those categories.

 
At January 11, 2009 at 8:48 AM , Blogger William Lang said...

By the way, here is a comment from Mr. Obama on the unemployment numbers. (This is from the transcript of This Week with George Stephanopoulos.)

OBAMA: I think we can fix this. But it's going to take some time. It's not going to happen overnight. And what we tried to do this week was, first of all, explain where we are in the economy. That the jobs numbers this week were terrible. That means we've lost 2.5 million last year. That's the most since World War II. You've got another 3.4 million people who have gone from full-time work to part-time work, or want full-time work. So the underemployment rate is extremely high. And, you know, whether it's retail sales, manufacturing, all of the indicators show that we are in the worst recession since the Great Depression.

 
At January 11, 2009 at 4:37 PM , Blogger Eric Schansberg said...

I think we can fix this.

--> Ironically, by leaving it alone. Anything else will almost certainly be taking advantage of a politically-convenient false-cause fallacy.

But it's going to take some time.

--> A smart thing to say politically.

That means we've lost 2.5 million last year. That's the most since World War II.

--> I don't see those numbers here: http://www.census.gov/statab/hist/HS-29.pdf. In any case, it's not in percentage terms, so it's not all that helpful (outside of rhetorical purposes). There are well more than 2.5 * more jobs today. So, if his numbers are correct, we'd need to lose 7 million jobs to be comparable.

You've got another 3.4 million people who have gone from full-time work to part-time work, or want full-time work.

--> Gone from FT to PT? Hmm... That's a little more than 2% of the workforce and surprising since I hadn't heard anything about this previously. I wonder if he's including furloughs. Anyway, given the distortions in the rest of his presentation, I'd want clarification here.

So the underemployment rate is extremely high. And, you know, whether it's retail sales, manufacturing, all of the indicators show that we are in the worst recession since the Great Depression.

--> This is laughably false. Outside of the financial crisis piece of this-- and the uncertainty it engenders-- the current situation will probably surpass the early 1990s. But it doesn't come close to matching the early 1980s-- let alone the decade-long New Deal debacle of the 1930s.

--> Obama seems to be following Bush in both style and substance. He's apparently finding rhetorical excess to be useful in supporting his agenda for "stimulus". A dubious start to a presidency that has not yet begun...

 
At January 11, 2009 at 4:38 PM , Blogger Eric Schansberg said...

It just occurred to me that he may be including non-civilian workforce (post-WW II) to come up with that statistic-- not an appropriate comparison!

 
At January 11, 2009 at 8:04 PM , Blogger Bryce Raley said...

Let's face it- only a continued recession/contraction, followed by a period of much less government involvement and much wiser fiscal policy will fix this.

Anything else I'm hearing at this point is talking-heads filling airtime or political rhetoric.

The first part of Obama's quote reminds me of the line from Nuke in Bull Durham. "Y'know I'm just happy to be here and hope I can help the ballclub. I just want to give it my best shot and good Lord willing, things work out. gotta play em one day at a time you know...

Not to pick on Obama- you could replace his name with almost anyone in our government on any given day.

 
At January 12, 2009 at 2:17 PM , Blogger Eric Schansberg said...

Back to WL's first question and my reply, I should also have mentioned that the dynamics of unemployment are more important than the statics. In other words, we'd like to know the length of unemployment spells and flows between unemployment, employment, and labor force participation.

 
At January 12, 2009 at 4:22 PM , Blogger Bryce Raley said...

The stats should become tougher and tougher to study, given that many predictions I've seen are saying employees with only make up 50% of the labor force post 2010. That means 50% would be free lance, contract workers, consultants.

Are you employed even if you didn't cut yourself a paycheck in your first year of business? Are you currently employed if you haven't had steady work? Is employment associated with a pay check? Benefits?

Since so much of our economy is service based and so little is in manufacturing and production, how will that muddy the stats in coming years? It's easy to say a guy who works at Ford on the line, was laid off, or is now part time. What about a social media firm that had contract workers and free lancers and they don't have any projects right now? I know people in this scenario. Call them last week, they may say they were unemployed, call them next week they may have work. Same thing for subcontractors, artists, bloggers, writers, etc.

 
At January 12, 2009 at 4:33 PM , Blogger Eric Schansberg said...

another great point!

 

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