Adjusted for Labor Force Growth, Jobless Claims Are Below the 1990-91 Recession

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ASSOCIATED PRESS -- The Labor Department reported today that initial jobless benefit claims rose to a seasonally adjusted 589,000 in the week ending Jan. 17, from an upwardly revised figure of 527,000 the previous week. The latest tally was well above Wall Street economists' expectations of 540,000 new claims. The total matches a 26-year high reached four weeks ago. The last time claims were higher was in November 1982, when the economy was emerging from a steep recession, though the work force has grown by about half since then.

The chart above from 1987 to 2008 shows why comparisons of unemployment claims today to past years are meaningless, without adjusting for the change in labor force. In the last 22 years, the U.S. labor force (blue line) has increased by 30%, from about 119 million in 1987 to more than 154 million today.

The chart below shows initial jobless claims as a percent of the labor force, to adjust for the increase over time in the population and labor force. December's 0.355% level (549,000 average weekly claims / 154,447,000 labor force) is above the 0.333% peak at the end of the 2001 recession, but still way below the 0.3915% peak of the 1990-1991 recession.

(Note: The January labor force number has not been released, but the average jobless claims so far in January (522,500 on a 4-week moving average basis) are actually lower than December's 549,000 number, so the January figure for jobless claims as a percent of labor force could be lower than December.)

Bottom Line: Adjusted for the size of the labor force, unemployment claims haven't even yet reached the level of 1990-1991 recession. So before we make exaggerated claims of the "worst economy since the Great Depression©" we might first make comparisons to the 1990-1991 recession, and it's still not yet as bad today as it was in the early 1990s. Calculated Risk uses a longer data set that includes the 1970s and early 1980s, showing the same thing - we've got a long way to go before today's economic conditions come close to matching previous recessions of the 1970s and 1980s.

A Google News search for the two phrases "unemployment claims" and "26 years" results in more than 100 news items that report some version of this story: "The number of new U.S. unemployment claims rose to 589,000 in the past week, matching the highest level in more than 26 years." But what most news reports failed to mention is that today's labor force (154.4 million) is almost 40% higher than in 1983 (110.7 million), see chart above (click to enlarge), meaning that unadjusted comparisons of jobless claims today to 1983 are relatively meaningless.

The chart below shows monthly jobless claims as a percentage of the total labor force, from Jan. 1973 to December 2008 (should be approximately the same in January 2009). The current level of jobless claims as a percent of the labor force (0.355%) is above the 2001 recession, but below the four previous recessions (1973-1975, 1980, 1981-1982 and 1990-1991). To reach the same levels of jobless claims (as a percent of the labor force) as the recessions of the 1970s and 1980s (0.60%), we would have to see jobless claims today reach levels above 900,000.