Friday, March 6, 2009

Unemployment at 8.1%

This morning I heard someone on the news predicting that unemployment in February might have climbed as high as 7.9%, and I thought to myself, it's not going to be that good, we've gone above 8%. And indeed, when the February figures were announced shortly thereafter, the national unemployment rate is 8.1%. You need to back to 1983 to find a report with a higher national unemployment rate, although we approached this level in the 1992 recession (where the worst unemployment rates was 7.7%.

Growing up as a student in high school and college in the 1980s, I grew up learning about unemployment rates of 10% (1982-1983). And even in college in the late 1980s, the unemployment rate seemed "great" when it was got down to 5.5%, and briefly even 5% (in 1989). So, I sort of had the idea that the "normal" range for unemployment was between 5% and 8% or so. Then, I lived through the 1990s. After the 1992 recession the unemployment rates kept dropping, and they slowly dropped all the way to 2000, by which time we had rates of 3.8% & 3.9% for some months. In the George W. Bush administration we had rates go up from 4.2% to 6.3% (in the summer of 2003), but then rates dropped back down to 4.4% (exactly two years ago, in March of 2007).

The thing is, a year ago we were still at 4.8%, and we the economy has been shedding jobs at a horrific rate. In the last six months (September '08 to February '09) the rates went 6.2%, 6.6%, 6.8%, 7.2%, 7.6%, 8.1%. That doesn't look to me like we're seeing any sort of slow-down. Looking back and the historical data for the start of that ugly recession in 1981-1983 I don't even see any 6-month period with a growth in unemployment like this. And in the past recessions the increases in the unemployment rate slow down before they hit the top, and then they sort of hang out at the high unemployment rates for a while and very slowly improve.

Clinton came into office in 1993 after unemployment had peaked (at 7.8% in 1992), and in this first year in office with a Democratic Party-controlled Congress the unemployment rate only went down from 7.3% to 6.6%. By the end of Clinton's second year in office unemployment had only dropped to 5.6%.

I guess what I'm thinking is that employment recoveries from peaks of unemployment take years (two or three, at least). Also, this recession is on track to be as bad as the one Ronald Reagan inflicted on us in the early 1980s. It took about two years for unemployment to drop back down from the high of 10.8% (in the winter of 1982-1983) to a rate around 7.2% (the rate in December of 1980, Carter's last full month in office). It then took a little over two additional years for unemployment to get to 6.3% (finally seen in April of 1987), which was the rate we had in January of 1980, the start of Carter's last year in office.

Well, I'm more optimistic about the president and congress we have now. The people running the nation now are far more likely to find solutions than the people we had running the show in the early 1980s.

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