Everyone knows that America’s unemployment rate is high. At 9.0%, it’s so high that 1 out of every 11 people is unemployed. To put that in perspective, go to the supermarket and start counting people. After every 10 people, imagine that the next one is unemployed. Do that while you shop and you’ll get some idea of what 9.0% unemployment really means. A lot of people are out of work.
Unfortunately, the real situation is worse than the official statistics suggest. While the official unemployment rate in the US is 9.0%, if you include the people who want jobs but have given up looking the rate jumps to 10.5%. Include the people who want full-time jobs but can only find part-time work, and the rate jumps again to 16.2%. All in all, 1 out of every 6 Americans who want a full-time job can’t find one.
And that’s not all. Add in the teachers, bank managers, and factory workers who gave up on finding work in their true professions and instead took jobs in retail and fast food and it gets even worse. No one knows how many there are, but they almost certainly push the real underemployment rate up to more than 20% — 1 out of every 5 Americans.
Economists and politicians have taken to calling the current downturn the “Great Recession.” They reassure us that as bad as it is, it’s just a bad recession, not a Second Great Depression. It’s true that unemployment in the original Great Depression maxed out at 21.3%. But that was in 1934, a full five years after the stock market collapse of 1929. We’re only three years into the current downturn. There’s still plenty of time for things to get worse.
In fact, if you include everybody who wants a full-time job but can’t find one, the unemployment rate today is pretty similar to what it was three years into the Great Depression of the 1930s. The government didn’t start collecting unemployment statistics until 1941, but economic historians have estimated what the unemployment rate was in the 1930s using other available statistics. The results are, well, depressing.
According to estimates published by the National Bureau of Economic Research, the unemployment rate was around 8.7% in 1930, the first year of the Great Depression. This figure includes people who were working part-time but still looking for full-time work as unemployed. In 2008, the equivalent figure was 10.6%.
Does the economy today need a balanced budget or a new fiscal stimulus? In the 1930s the Republicans pushed for a balanced budget, and under Herbert Hoover they got it. Then Franklin Delano Roosevelt took office in 1933 promising a New Deal to put America back to work. With the Roosevelt’s stimulus spending the job market slowly recovered, but it took a long time to get out of the hole we were in.
Economists tell us that the US economy is now growing again. Technically, the National Bureau of Economic Research says that the current downturn started in December 2007 and ended in June 2009. But that doesn’t mean that unemployment will go away on its own. In the Great Depression that started in 1929, the economy was growing again by the end of 1933. The job market didn’t fully recover until 1941. We may be in for a long slog.