Relatively Low Unemployment Is No Cause for Optimism

by: Michael Panzner

Many Wall Street analysts and (mostly right-wing) commentators (see "5 Reasons Why Today is Not Great Depression II" for one example) say we are not headed for a repeat of what took place 80 years ago because the unemployment rate is "only" 6.7 percent, around a quarter of what it was during the Great Depression.

But what they conveniently forget to mention is that national jobless totals only began to spike following the crash year of 1929 and were actually fairly steady up until that point. Unemployment did not hit the widely cited peak (on an annual basis, at least) until three - four years later.

Below is a graph showing the annual unemployment rate for the last four years overlaid on similar data for the period 1926 - 1935. While the future trend for this series might not follow the same trajectory as before, the fact that it hasn't yet hit double-digits is not necessarily a cause for optimism.

(Otherwise, a pessimist might note the fact that data covering the last four years looks somewhat worse than comparable statistics for the period prior to the Great Crash. Perhaps the upside this time around will be greater?)