Unemployment: U-6 data versus the Great Depression
Because of changes in the way the unemployment rate is calculated, the figures today are apple to oranges comparisons to the ones quoted for the Great Depression or even the 1970s. Further, changes in the economy (less manufacturing) and the labor force composition (more women) make comparisons equally difficult.
Nevertheless, it bears noting that the unemployment rate in the United States was 3.6% in April 1930, this after the Great Depression had ostensibly started. By October 1932, 30 months later, it was 24.8%. It peaked at 25.6% in May 1933. These are non-seasonally adjusted figures.
Fast forward today and you might use the comprehensive unemployment figure U-6 as a basis of comparisons, of course with the caveats I mentioned in the first paragraph in mind. The Labor department defines this figure as “total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.”
In September 2006, on the cusp of the Housing Bubble bursting, the U-6 unemployment figure was 7.6%. The latest non-seasonally adjusted figure is 16.2% (this is much higher than the 15.6% seasonally-adjusted figure making the rounds on the blogosphere).
The long and short of this comparison is that the crash in employment levels during the Great Depression was much worse than it is today. Nevertheless, the U-6 numbers are pretty frightening on their own and they are due to creep higher.
Here’s that comparison in graphical form.
Not the easiest graph to read. It seems like it works against the upshot* of your post by overemphasizing the directional correlation and deemphasizing the differences in magnitude and amplitude (how big and how fast the change was in 29-32 versus the current one). IOW the first glance interpretation of the illustration is “those two paths look pretty similar” instead of “in the time it took our unemployment rate to double theirs had increased sixfold.”
I hope the feedback was helpful. I enjoy your posts and am a regular reader. Thanks for the hard work that goes into the site.
*”The long and short of this comparison is that the crash in employment levels during the Great Depression was much worse than it is today.”
Don,
thanks for the feedback. You are probably right that the two look similar. You should also note that I used 30-month periods that are not exactly analogous i.e. 2006 was still a growth period. Watch these graphs become MORE similar as time goes by. A good analogy might be 1930-1932 vs. 2008-2010.
Die Nervosität bei Vekselbergs Getreuen war in den letzten Tagen mit Händen zu greifen. Als ob sie geahnt hätten, dass in letzter Minute erneut ein Hindernis auftauchen würde, das die Übernahme der Kontrolle bei Sulzer gefährdet. Verunsichert hatte sie das hartnäckig kursierende Gerücht, Sulzer-Präsident Ulf Berg, den Vekselberg an der morgigen Generalversammlung abwählen lassen will, plane ein letztes Störmanöver.
Und zwar wolle Berg Vekselbergs Aktienpaket – der Oligarch hält 31 Prozent an Sulzer – das Stimmrecht aberkennen, und zwar mit der Begründung, Renova habe das im Mai auslaufende Stillhalteabkommen verletzt, weil sie aktiv einen neuen Sulzer-Präsidenten gesucht und in Jürgen Dormann dafür auch einen Kandidaten gefunden habe.
Die Schreckensvision ist inzwischen realistischer geworden, als Vekselberg lieb sein kann. Denn kurz nach Börsenschluss liess das Eidgenössische Finanzdepartement eine Bombe platzen: Es hat ein Verwaltungsstrafverfahren gegen Vekselberg, Ronny Pecik und Georg Stumpf eröffnet. Das Departement verdächtigt das Trio, beim Aufbau einer grossen Beteiligung an Sulzer vor zwei Jahren die Meldepflichten der Börse verletzt zu haben.
If anything the current U-6 number is much closer to the way Depression era unemployment was calculated. What your chart fails to show is this: Unemployment was 3.2% in 1929 and did not reach 8% until the end of 1930, and only reached 15.9% by the end of 1931. In short, it took 26 months after the 1929 market crash for unemployment to reach that level–yet we are already there! If we start our chart with the Oct of 2008 market crash, our U-6 is already ahead of the 1931 mark…and this in just six months time!
John,
I would agree that U-6 is probably more similar to the unemployment numbers from before the 1990s. What you are pointing out is that we have a systemically higher rate of unemployment going into this downturn than existed pre-1929. The bearish view would be that this means we will see some serious fall-offs in aggregate demand as more people become unemployed. The correct time frame for comparison will be 1930 to 2008. Let’s see where we are by the end of the year because 1931 and 1932 were the real difficult years.