Comparison Of Employment Recovery Across Recessions And Financial Crises
One method of analyzing the impact of recessions on employment is to measure the period of time it takes to return to the pre-recession employment peak. By this measure, the 20082009 recession was considerably worse than the five other U.S. recessions from 1970 to present. By May 2013, U.S. employment had reached 98% of its pre-recession peak after approximately 60 months. Employment recovery following a combined recession and financial crisis tends to be much longer than a typical recession. For example, it took Norway 8.5 years to return to its pre-recession peak employment after its 1987 financial crisis and it took Sweden 17.8 years after its 1991 financial crisis. The U.S. is recovering considerably faster than either of these countries.
Unemployment Numbers Bls Vs Gallup June 2017
| Unadjusted U-3 |
| 4.5% |
Data Collection Methods:
For Calculating Unemployment, the BLS says they interview60,000 different households statistically calculated to represent the entire country. However, they only contact about 15,000 of these households and then use statistical modeling to estimate the U.S. unemployment rate from this data sample. The households in the pool are rotated to limit the burden on any specific family. In addition to questions about employment status the CPS tracks work experience, annual earnings, and whether school-aged children are working, school enrollment, etc.
See Is the Government Fudging Unemployment Numbers? for the comparison of Gallup numbers vs. Bureau of Labor Statistics numbers.
Labor Force Participation Rate
The LFPR can have a major impact on the actual level of unemployment.
Tom Thomas, one of our readers reminds us that if you want to compare U-3 numbers you have to do it in light of the Labor Force Participation Rate . He said, since U-3 only measures those who are actively looking for a job if the labor force declines the U-3 rate will appear better than it actually is. So, in order to compare two time periods, you have to adjust for the LFPR.
For more information see Labor Force Participation Rate.
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Unemployment Parallel With A Rich Economy
Of course, it’s possible to have both low unemployment and a rich economy. This combination is seen in Qatar. According to the World Bank, GDP per capita in Qatar was $61,276 in 2021. That wealth helps its standing in the above listing, as a country’s unemployment rate only factors in those actively looking for work. The working-age child of rich parents may feel less pressure to earn money and be more inclined to spend it.
Qatar’s economy is driven by oil and natural gas, hence its extreme wealth, though it’s been making a sustained push to diversify into financial services, construction, restaurants, and hotels.
How The Us Government Comes Up With The Current Unemployment Rate
According to the U.S. Bureau of Labor Statistics, they dont actually track the unemployment numbers but instead, they base the all-important Unemployment Rate on a survey. You would think they would collect the numbers from the 50 states who would get them from their unemployment offices. But that is not how it is done. Unemployment rates are calculated based on a random survey called the Current Population Survey . No one can accuse the government of being efficient, rather than calling the main office of 50 state offices , instead, the government calls up 60,000 households every month and then estimates the unemployment rate based on that sample. According to the BLS,
Every month, one-fourth of the households in the sample are changed, so that no household is interviewed more than 4 consecutive months. This practice avoids placing too heavy a burden on the households selected for the sample. After a household is interviewed for 4 consecutive months, it leaves the sample for 8 months, and then is again interviewed for the same 4 calendar months a year later, before leaving the sample for good. This procedure results in approximately 75 percent of the sample remaining the same from month to month and 50 percent from year to year.
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How Unemployment Tracks Recessions
Unemployment tracks the business cycle. Recessions are part of that cycle and can cause high unemployment. Businesses often lay off workers and, without an income, those jobless workers have less money to spend. Lower consumer spending reduces business revenue, which forces companies to cut more payroll. This downward cycle can be devastating to individuals and the economy.
The highest rate of U.S. unemployment was 24.9% in 1933, during the Great Depression. Unemployment remained above 14% from 1931 to 1940. It remained in the single digits until September 1982 when it reached 10.1%. During the Great Recession, unemployment reached 10% in October 2009. In 2020, it reached double digits again at 14.7% in April when the U.S. was dealing with a pandemic and recession.
The Federal Reserve uses expansionary monetary policy to lower interest rates. Congress uses fiscal policy to create jobs and provide extended unemployment benefits.
The unemployment rate typically falls during the expansion phase of the business cycle. The lowest unemployment rate in modern history was 1.2% in 1944.
It may seem counterintuitive to think unemployment can get too low, but it can.
The Federal Reserve does not target specific figures for the natural rate of unemployment, but simply seeks “the maximum level of employment” as part of its long-term financial policy goals.
Difference Between The Unemployment And Jobs Reports
The unemployment rate and figures from the jobs report don’t always tell the same story, because they are taken from two different surveys.
The unemployment rate is taken from the household survey of individuals. It describes who is employed and who isn’t based on their responses.
The number of jobs added is taken from the establishment report, more commonly called the “nonfarm payroll report.” This survey of businesses describes how many jobs were created or lost by industry.
The number of unemployed doesn’t match the number of jobs lost, because these reports are taken from completely different sources. Those discrepancies are expected, and the estimates are revised each month as more data comes in.
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Us Job Growth Likely Slowed In June Unemployment Rate Seen At 36%
People shop in a supermarket as inflation affected consumer prices in Manhattan, New York City, U.S., June 10, 2022. REUTERS/Andrew Kelly
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- Nonfarm payrolls forecast to increase by 268,000 in June
- Unemployment rate seen unchanged at 3.6%
- Average hourly earnings expected to gain 0.3%
WASHINGTON, July 8 – U.S. employers likely hired the fewest workers in 14 months in June, but the jobless rate probably remained near pre-pandemic lows, underscoring labor market tightness that could encourage the Federal Reserve to deliver another 75-basis-point interest rate increase later this month.
Despite the anticipated slowdown in job growth last month, the Labor Department’s closely watched employment report on Friday could ease fears of a recession that have mounted in recent days following a raft of tepid economic data, ranging from consumer spending to manufacturing.
While demand for labor is cooling in the interest rate-sensitive goods-producing sector of the economy, businesses in the vast services industry are scrambling for workers. There were 11.3 million job openings at the end of May, with 1.9 jobs for every unemployed person. read more
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Still, the pace would be well above the average that prevailed before the COVID-19 crisis and would leave employment about 554,000 jobs below the pre-pandemic level.
John Lafarge Professor Of Public Policy Georgetown University
Given these decisions, how well has the US performed, in both employment and health outcomes, relative to other countries during the crisis? By comparing both employment and health data for the US with those of other OECD countries in the first five months of 2020, we can ascertain the extent to which our federal policy response has either mitigated or exacerbated damage on both dimensions.
In Table 1 below, I present employment data and virus case outcomes for the richest 25 OECD nations , among those with populations of over 4 million people . I have drawn the data from two highly credible websites: 1) Trading Economics for the economic data and 2) the Johns Hopkins University Coronavirus Resource Center for data on virus cases and mortality. The economic data appear in part A of the table, and the virus case data in part B.
Table 1: U.S. v. other OECD countries : Employment and virus outcomes in 2020
Part A. Unemployment rates in 2020
| Country |
| 0.032 | – |
The three columns of part A present unemployment rates in January, March and April 2020 respectively. While most OECD countries already report data for the first three months of the year, only about half have already done so for the month of April . Furthermore, four of the countries report only quarterly rather than monthly rates, and these only for the first quarter of 2020.
The data in Table 1B, for total cases and deaths as well as new cases and deaths per capita, indicate the following:
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How Does A High Unemployment Rate Affect The Economy
Although high unemployment is a lagging indicator that demonstrates other economic problems, it can also cause economic damage of its own. When workers aren’t participating in the economy, the gross domestic product will suffer, reducing economic growth. It can also create health problems among unemployed workers, leading to increased healthcare costs down the road. Studies have shown that sustained high unemployment can also cause long-term damage to workers’ earning potential and wealth.
Seasonally Adjusted Unemployment Rate Chart 1948
Current US Unemployment Rate Chart
Unemployment is now below several previous lows of 1960, 1973, 1979, 1989, and 2006-7. This means that unemployment has left the extraordinarily bad i.e. red zone and has entered the green zone in the chart above. Interestingly, this may be a factor in increasing inflation pressures.
Prior to the COVID-19 spike, February 2020s 3.5% Seasonally Adjusted U-3 unemployment levels were extraordinarily good i.e. just a hair above the 1969 lows of 3.4%. The only break below 3.4% was all the way back in 1953 . The COVID worldwide spike took unemployment to unprecedented high levels but unemployment is now back within the good range.
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Persons With Multiple Jobs
The BLS reported that in 2017, there were approximately 7.5 million persons age 16 and over working multiple jobs, about 4.9% of the population. This was relatively unchanged from 2016. About 4 million worked a full-time primary job and part-time secondary job. A 2020 study based on a Census Bureau survey estimated a higher share of multiple jobholders, with 7.8% of persons in the U.S. working multiple jobs as of 2018 the study found that this percentage has been trending upward during the past twenty years and that earnings from second jobs are, on average, 27.8% of a multiple jobholder’s earnings.
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What Is The Global Unemployment Rate
The International Labor Organization forecasts the global unemployment rate for 2022 to be 5.9%. This is lower than the 6.6% and 6.2% rates witnessed in 2020 and 2021, respectively, but remains above 2019’s rate of 5.4%. Unemployment rates are closest to their pre-pandemic levels in high-income countries like the U.S., the U.K., and Canada, where unemployment is at or near historic lows.
Job Growth Projections 20162026
The U.S. Bureau of Labor Statistics reported on October 24, 2017 its projections of job growth by industry and job type over the 20162026 period. Healthcare was the industry expected to add the most jobs, driven by demand from an aging population. The top three occupations were: personal care aides with 754,000 jobs added or a 37% increase home health aids with 425,600 or 47% and software developers at 253,400 or 30.5%.
BLS also reported that: “About 9 out of 10 new jobs are projected to be added in the service-providing sector from 2016 to 2026, resulting in more than 10.5 million new jobs, or 0.8 percent annual growth. The goods-producing sector is expected to increase by 219,000 jobs, growing at a rate of 0.1 percent per year over the projections decade.” BLS predicted that manufacturing jobs would decline by over 700,000 over that period.
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Alternative Data Sources Shrinking
For years the Gallup survey people conducted their own survey to determine the unemployment rate and published an unadjusted version. Unfortunately, as of July 31, 2017, they discontinued surveying unemployment-related numbers including U-3, U-6 and Payroll to Population . This puts us back to relying strictly on government sources and unfortunately in the past, we found significant differences between what the government was telling us and what independently collected numbers told us.
For instance, according to Gallup the Unadjusted Unemployment for June 2017 was 5.1% while the BLS said it was 4.5%. Gallup said Underemployment was 13.4% while the BLS said it was 8.9%.
Us Unemployment Rate History
Kimberly Amadeo is an expert on U.S. and world economies and investing, with over 20 years of experience in economic analysis and business strategy. She is the President of the economic website World Money Watch. As a writer for The Balance, Kimberly provides insight on the state of the present-day economy, as well as past events that have had a lasting impact.
Erika Rasure, is the Founder of Crypto Goddess, the first learning community curated for women to learn how to invest their moneyand themselvesin crypto, blockchain, and the future of finance and digital assets. She is a financial therapist and is globally-recognized as a leading personal finance and cryptocurrency subject matter expert and educator.
The Balance / Julie Bang
The unemployment rate is the percentage of unemployed workers in the labor force. It’s a key indicator of the health of the country’s economy. Unemployment typically rises during recessions and falls during periods of economic prosperity. The rate also declined during several U.S. wars, particularly during World War II. The unemployment rate rose during the recessions that followed those wars.
Here’s how the unemployment rate has changed over time and how it’s compared to gross domestic product and inflation.
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Fact Check: Is Us Unemployment Rate Lowest In 50 Years
The cost of living crisis, fueled by rampant inflation , has made the state of the U.S. economy a hot issue for voters and a headache for President Joe Biden.
While the broader picture looks bleak, the rate of unemployment has hit some of its lowest levels in American history, a remarkable recovery from the peak of the COVID-19 pandemic which left near-record numbers of people jobless.
While lower unemployment may be seen as a token of strength, leaders are still grasping for clues about how to reignite the country’s economic growth.
Among this conversation was the recent suggestion by a senior Republican that reducing unemployment even further could be the answer.
The Claim
A tweet sent on July 17, 2022, claims the unemployment has not been lower than now for 50 years.
The post includes a Fox News interview with National Republican Senatorial Committee Chair Rick Scott who insisted that “we need to get Americans back to work.”
“If you’re able bodied, you don’t have young children, incapacitated dependent, get to work.” he added.
the unemployment rate is as low as it has been in more than 50 years
Aaron Rupar
The Facts
Unemployment rates in states across the U.S. have fallen dramatically in 2022. It was reported in April that Nebraska, Utah, Indiana, Montana, Alaska, Arizona, Georgia, Idaho, Mississippi, Tennessee, West Virginia and Wisconsin had set new lows for people out of work.
You will find more infographics at Statista
How To Use The Unemployment Rate
Keep in mind that the unemployment rate is a lagging indicator. It tells you what has already happened, since employers only lay off workers after business slows down.
Companies resist hiring new workers when a recession is over, until they can be sure that the economy will stay strong. The economy could improve for months, and the recession could be over before the unemployment rate drops. It’s not suitable for predicting trends, but it’s useful for confirming them.
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What Is Not Included In The Unemployment Rate
The unemployment rate only takes into consideration the labor force. The labor force consists of those individuals that are currently working and those that are not working but who are looking for work. If an individual has not been looking for work in the previous four weeks, they are not considered part of the labor force and do not factor into the unemployment rate.
