Economics for One

Unemployment

I was impressed with the analysis in Four Bad Bears.  However, I think the pain of a recession is best measured by the change in the unemployment rate.  This is a measure of how many people are having to tighten their belts.  When unemployment is steady, there are roughly the same number of people losing their jobs as there are finding new jobs.  When unemployment rises quickly, there are many more people losing their jobs than finding new jobs.  The steeper and more dramatic the rise, the harder it is for newly unemployed people to find work.

This chart shows the increase in the unemployment rate from the start of each recession (using the “official” US measure, which may be biased to make current unemployment levels seem lower).

As you can see, by this measure the current recession is one of the steepest and most dramatic of any in recent history.

This analysis does not include the Great Depression, as we didn’t have any good measure of unemployment at the time.  If we can find a good proxy for it, or some way of measuring it, I will add it.  Also, this chart doesn’t really tell the whole story, as it doesn’t take into account underemployment (people who are working part-time when they would rather work full-time).  By all accounts, underemployment is worse for this recession than prior recessions, so including it would only make the current recession look that much more pronounced.

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