Job Losses & the Great Depression

Kurt Brouwer February 14th, 2009

There is no question that unemployment is up — currently 7.6% — and there is little doubt it will keep going up for a while because unemployment is a lagging indicator that generally does not peak until after a recession ends.

Every day, we see headlines about the millions of jobs that have been lost and that sounds scary. Though we all need to be concerned about job losses, we also need to put losses in perspective. At 153,716,000, our civilian labor force is much bigger today than it was in 1981. For example, in 1981, the work force was only 106,768,000.

And, the labor force today is bigger than the entire population of the country was in the Great Depression. If you include Alaska and Hawaii, the 1930 Census Report put the entire population at 123,202,660. So, millions of job losses today are much less significant than they were back then.

At his Carpe Diem blog, University of Michigan economist Mark Perry posted this chart which displays job losses in a given year as a percentage of the labor force. This illustrates quite effectively that the current spate of job losses compares to 1981 and is far lower than job losses during the Depression.

cd-2-09-job-losses.jpg

Source: Carpe Diem

Here is another way to get a handle on how job losses in this recession compare to previous ones:

time-curious-capitalist-2-09-six_recessions.gif

Graphic by Feilding Cage/TIME.com

The lighter blue line represents job losses in this decline. It is serious, yet it is not that different from a number of other recessions from the 1970s and 1980s. However, job losses this time are far more severe than they were in the two most recent recessions, which were quite mild by historical standards.

We do not yet know how bad job losses will be this time around, but we can estimate that losses will probably be as bad as they were in the 1981 downturn, if not a bit worse.

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2 Responses to “Job Losses & the Great Depression”

  1. Mark A. Sadowskion 14 Feb 2009 at 6:07 pm

    I spent the morning looking at data trying to come up with a better model for what I percieve is a forthcoming disinflation. I was worried about the possibility of rapid deflation until I saw this post. I was well aware of the Great Depression figures but nevertheless this drove it home that what could happen will be very mild by comparison. Quite evidently my data set needs to be expanded.

    Nevertheless, I still think disinflation could occur every year through 2015 assuming the CBO is correct about its baseline outlook and the effects of the stimulus. Given that core PCE only rose by about 0.15% last quarter I think that deflation is a real concern in the near future. Even mild deflation could have real consequances similar to what happened in Japan during the Lost Decades(s). I don’t think I am being excessively alarmist in this speculation.

  2. Paoloon 17 Feb 2009 at 6:12 am

    Indeed present job losses line is going down and nobody knows where it will stop, hence the comparison with previous bottoms is not very useful to compare these crisis……

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