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We still hear daily commentary about "the worst economy since the Great Depression." The chart above shows the monthly unemployment rate in the U.S. back to January of 1930 and eight different peaks in the jobless rate. Before we start make alarming and fantastic comparisons of today's economic conditions to the 1930s, we should probably start by comparing today's economy to more recent economic contractions, and more recent peaks in the jobless rate.

The current October jobless rate of 6.5% will likely rise further, but according to the most recent October WSJ survey of 56 forecasters, the consensus forecast for the unemployment rate in December 2009 is 6.8%. So let's assume that the forecasters are too optimistic and the jobless rate goes to 7% by the end of next year, how bad would that be?

It still would not be as serious as the 7.8% peak in the jobless rate in 1992, the 10.8% peak in 1982-83, or the 9% peak in 1975. So before we make exaggerated comparisons to the 1930s when the unemployment rate peaked at 25.6%, maybe we should more realistically be making comparisons to the more recent double-digit jobless rates of the 1980s and the 7.8% rate in 1992. And we're not even close to those rates yet.

Proposal: Once we have the double-digit jobless jobless rates of the 1980s, which seems very, very unlikely, then we can start making comparisons to the 1930s. Until then, let's use the 1970s, 1980s or the 1990s as the benchmark comparison decade for the "the worst economy since...."

Source: Let's Clarify "The Worst Economy Since...." Debate