Duration, not rate

More

There are a lot of headlines screaming about how the U.S. unemployment rate is exploding, and has now reached levels not seen since 1983.  The February unemployment numbers for February really are quite bad; unemployment increased 0.5%, from 7.6% to 8.1%.  May of last year was the only month in any of the recessions of the past 25 years that saw that big a jump in the rate.

When we think about how bad unemployment gets in any given recession, however, we need to consider three numbers: the starting point, the average monthly change in the rate, and the duration of the recession.  The past two recessions (2001 and early 90s) were very mild, so I'll compare the current recession to the 81-82 recession, which was by most measures the worst since the Great Depression.


The average monthly increase in unemployment rate was .225 points in the prior recession, and in the current recession it has (so far) been .229 points, or almost exactly identical.  The prior recession lasted 17 months, and this one has lasted 15 months so far.  But unemployment peaked in the prior recession at 10.8%, which we are extremely unlikely to approach within the next couple of months when our recession reaches 17 months.  Why?  Because of where we started.  The U.S. unemployment rate was 7.2% at the start of the prior recession, which is a rate we only reached last December, after more than a year of recession.

The structural work on the economy is at least as important as how we deal with the recession. Doing something, anything, to stop the pain of the current recession, no matter what its structural effects on the economy, might seem practical, but it is not.  Bailing out failing companies, preventing write-down of assets like mortgages, borrowing against our future with stimulus spending and so on might feel good today - and some of this surely has to be done - but we should recognize that we will pay the price in higher structural unemployment every future month we are not in recession, and probably make it harder to react when new difficulties arise.

Jump to comments
Presented by

Jim Manzi

Jim Manzi is Founder and Chairman of Applied Predictive Technologies (APT), an applied artificial intelligence software company. He is In also a Senior Fellow at the Manhattan Institute and a Contributing Editor of National Review, where he writes frequently for both the print and online editions on topics related to science, technology, business and economics.
Get Today's Top Stories in Your Inbox (preview)

Hunting With Poison Darts

An indigenous forest dweller in Borneo explains one of his tribe's oldest customs: the art of the blowpipe.


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

I Am an Undocumented Immigrant

"I look like a typical young American."

Video

Juice Cleanses: The Worst Diet

A doctor tries the ever-popular Master Cleanse. Sort of.

Video

Why Did I Study Physics?

Using hand-drawn cartoons to explain an academic passion

Video

What If Emoji Lived Among Us?

A whimsical ad imagines what life would be like if emoji were real.

Video

Living Alone on a Sailboat

"If you think I'm a dirtbag, then you don't understand the lifestyle."

Writers

Up
Down

More in Business

Just In