September 11, 2009 revised with additional data Dec.7,2010
Economists and other analysts are speculating about how long it will take now that a technical recovery is underway(that is growth is now positive and spreading through various indices) for the labour market to reflect these positive changes. This is a very important question because the headline unemployment number is the key number for most people in the population. Unemployment, quite rightly is at the centre of people's concerns.
We can get some very useful insight into this question by studying the historical data available from the excellent U.S.Bureau of Labour statistics.
Below, courtesy of the Bureau, I have reproduced their monthly unemployment time series from 1980 to present. During these past three decades there have been three major recessions: 1980-1982, 1990-1991 and 2007-2009. Each time unemployment has risen substantially from the low point or peak of the business cycle to a high point usually past the point where the trough of the cycle was reached.
Have a look at the data below paying particular attention to January to March 1980 when unemployment was 6.3 %; November and December 1982 when it peaked at 10.8 %.
April 1987 when the rate once again finally reached its previous 1980 low; March 1989 when it reached a new cyclical low of 5.0 %; June of 1992 when it peaked again because of the recession at 7.8 %.
May of 1997 when it fell below its previous low of 5.0 % to 4.9 %;April 2000 when it fell to its modern forty year low of 3.8 %;June 2003 when it peaked again at 6.3%.
October 2006 when it fell to its most recent low of 4.4 %; November 2007 when the current recession was getting underway of 4.7 % and its current rate as of August 2009 of 9.7 %.
So we get the following results for the three recessions in question.
Unemployment rose and stayed high for 68 months during and after the 1980-82 recession.
During and after the 1990-1991 recession it rose not nearly so high but stayed elevated, that is above 6 % for four years or 48 months.
This current recession began 18 months ago and now seems to have ended in June or July.Based on the previous two experiences we can, in the worst case scenario expect unemployment to remain high(that is above 7 %) for the next two to three years.In the 1980-82 recession unemployment peaked at 10.8 %. Within 12 months of that peak the rate had fallen back down to 8.3 %. a fall of about 25 %. In the 1990-92 recession unemployment peaked at the much lower figure of 7.8%.Within one year it had fallen to 7.0 % a drop of of 11 %. It took years for it to drop by 24 %.So it will be interesting to see if this recession follows the 1980s recession as opposed to the 1990s recession in terms of the speed with which unemployment falls.
If I were to guess given the fact that the rate has risen so substantially this time I would guess that the fall will more resemble and perhaps exceed the speed with which unemployment fell in the 1980s.
However, this time, unlike the previous two recessions the fiscal and monetary stimulus is more substantial although it could well have been greater on the fiscal side, so in the best case scenario we will see unemployment peaking shortly and dropping more rapidly than in the previous two major recessions.But even in this scenario the rate will remain elevated for many months. This is why recessions are such a scourge and need to avoided.
Time and the data will tell the story.
www.bls.gov U.S. bureau of Labour statistics
Data extracted on: September 11, 2009 (2:40:21 PM)
U.S.Labor Force Statistics from the Current Population Survey
Series Id: LNS14000000
Seasonal Adjusted
Series title: (Seas) Unemployment Rate
Labor force status: Unemployment rate
Type of data: Percent
Age: 16 years and over
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
1980 6.3 6.3 6.3 6.9 7.5 7.6 7.8 7.7 7.5 7.5 7.5 7.2
1981 7.5 7.4 7.4 7.2 7.5 7.5 7.2 7.4 7.6 7.9 8.3 8.5
1982 8.6 8.9 9.0 9.3 9.4 9.6 9.8 9.8 10.1 10.4 10.8 10.8
1983 10.4 10.4 10.3 10.2 10.1 10.1 9.4 9.5 9.2 8.8 8.5 8.3
1984 8.0 7.8 7.8 7.7 7.4 7.2 7.5 7.5 7.3 7.4 7.2 7.3
1985 7.3 7.2 7.2 7.3 7.2 7.4 7.4 7.1 7.1 7.1 7.0 7.0
1986 6.7 7.2 7.2 7.1 7.2 7.2 7.0 6.9 7.0 7.0 6.9 6.6
1987 6.6 6.6 6.6 6.3 6.3 6.2 6.1 6.0 5.9 6.0 5.8 5.7
1988 5.7 5.7 5.7 5.4 5.6 5.4 5.4 5.6 5.4 5.4 5.3 5.3
1989 5.4 5.2 5.0 5.2 5.2 5.3 5.2 5.2 5.3 5.3 5.4 5.4
1990 5.4 5.3 5.2 5.4 5.4 5.2 5.5 5.7 5.9 5.9 6.2 6.3
1991 6.4 6.6 6.8 6.7 6.9 6.9 6.8 6.9 6.9 7.0 7.0 7.3
1992 7.3 7.4 7.4 7.4 7.6 7.8 7.7 7.6 7.6 7.3 7.4 7.4
1993 7.3 7.1 7.0 7.1 7.1 7.0 6.9 6.8 6.7 6.8 6.6 6.5
1994 6.6 6.6 6.5 6.4 6.1 6.1 6.1 6.0 5.9 5.8 5.6 5.5
1995 5.6 5.4 5.4 5.8 5.6 5.6 5.7 5.7 5.6 5.5 5.6 5.6
1996 5.6 5.5 5.5 5.6 5.6 5.3 5.5 5.1 5.2 5.2 5.4 5.4
1997 5.3 5.2 5.2 5.1 4.9 5.0 4.9 4.8 4.9 4.7 4.6 4.7
1998 4.6 4.6 4.7 4.3 4.4 4.5 4.5 4.5 4.6 4.5 4.4 4.4
1999 4.3 4.4 4.2 4.3 4.2 4.3 4.3 4.2 4.2 4.1 4.1 4.0
2000 4.0 4.1 4.0 3.8 4.0 4.0 4.0 4.1 3.9 3.9 3.9 3.9
2001 4.2 4.2 4.3 4.4 4.3 4.5 4.6 4.9 5.0 5.3 5.5 5.7
2002 5.7 5.7 5.7 5.9 5.8 5.8 5.8 5.7 5.7 5.7 5.9 6.0
2003 5.8 5.9 5.9 6.0 6.1 6.3 6.2 6.1 6.1 6.0 5.8 5.7
2004 5.7 5.6 5.8 5.6 5.6 5.6 5.5 5.4 5.4 5.5 5.4 5.4
2005 5.2 5.4 5.2 5.2 5.1 5.1 5.0 4.9 5.0 5.0 5.0 4.8
2006 4.7 4.8 4.7 4.7 4.7 4.6 4.7 4.7 4.5 4.4 4.5 4.4
2007 4.6 4.5 4.4 4.5 4.5 4.6 4.7 4.7 4.7 4.8 4.7 4.9
2008 4.9 4.8 5.1 5.0 5.5 5.6 5.8 6.2 6.2 6.6 6.8 7.2
2009 7.6 8.1 8.5 8.9 9.4 9.5 9.4 9.7 9.8 10.1 10.0 10.0
2010 9.7 9.7 9.9 9.7 9.5 9.5 9.6 9.5 9.6 9.6 9.6 9.8
Jan Feb. Mar April May June July Aug Sept.Oct Nov Dec
bls.gov
U.S. Bureau of Labor Statistics 2 Massachusetts Avenue, NE Washington, DC 20212-0001
www.bls.gov | Telephone: (202) 691-5200 | Do you have a Data question?
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