Unemployment hit 7.2% in December, the highest since January 1993– as the economy was recovering from the pseudo-recession of 1991-1992.

In November 1982, the unemployment rate was 10.8%.

Since the “natural rate of unemployment”– the part of unemployment you can’t get rid of (at least without severe long-term consequences)– is generally thought to be 4.0-4.5%.

So, today’s unemployment rate is 2.7-3.2% higher than the natural rate– less than half of the unemployment above the natural rate in 1982 (6.0-6.3%).

And of course, we’re nowhere near the unemployment of the Great Depression when the rate was in double-digits for more than a decade, including 19% in 1939– the 6th year of the (wildly over-rated) “New Deal”.

  • Daniel

    Actually, if you calculate unemployment using the same standards that were used at the time of the Great Depression, our current unemployment rate is about 18%. Standards of measuring unemployment were revised under Ronald Reagan and later Bill Clinton (with the later notably defining away “discouraged workers” from the statistic). It doesn’t do much good to compare the nominal rates with such different measurement criteria.

    Second, I would question your premise that an economy like ours must have 4-5% “natural” unemployment or face “severe long-term consequences.” This flies in the face of classical liberal political philosophy, contemporary Austrian economics, and the philosophy of liberty. In a free market there simply *is* no involuntary unemployment. Nothing suggests we “need” 4-5% of our workers hanging around, doing nothing.

    Palliative blog posts like these, I think, tend to hide or blur the real issues rather than put things in context. Sure, we have many great things in America, but let’s not forget that the barbarians are always ‘at the gates’ and liberty is always hanging in the balance. Right now is certainly not the time to cite employment statistics favorably. We are, after all, still trying to work through the consequences of a government-induced economic boom, with all of the malinvestment that implies (which is a lot!) Employment is but one such “investment” that needs painful changes before we can see positive, well-founded growth once more.

  • I’m not aware of such dramatic changes in the calculation of the unemployment rate– to make such comparisons meaningless, let alone deceptive.

    My comment on the “natural rate” assumes the current regime, particularly with respect to labor market policies. Beyond that, you still have something less than perfect information in labor markets, which makes search behavior (of some length)– and thus, some level of unemployment– a necessity.

    I don’t intend the post to be palliative at all. Rather, the intent is to reduce the current near-hysteria, which increases the probability of additional freedom-depressing policies.

    Or putting it another way, we have great cause for concern, but the current unemployment rate is not in the top tier (at least long-term).

  • Micha Elyi

    Always be suspicious of claims that begin with the word ‘actually.’