Unemployment Rate Today, February 5, 2010 Versus the Rate in the Great Depression

Or are we Already There?

PUBLISHED UNEMPLOYMENT RATE TODAY

On this morning of February 5, 2010, statistical unemployment came in at 9.7% which appeared to be an improvement. But there are several reasons for the decline from 10% to 9.7%. The first factor being that many of those without work, 1.1 million by several expert calculations, have just stopped looking and therefore are not counted in the numbers. Secondly, many government temps have been hired to participate in the 2010 census taking statistics. These jobs will go away in a few months and we will be right back where we were. Also, according to Peter Barnes, the Department of Labor did a convenient "complex revision" of data, called "benchmarking" and altered the numbers saying they were not correct and needed to be lowered. Analysts have concluded that if these discarded individuals had been counted we would be looking at more like 16.5% unemployment.

The Obama administration promised that the stimulus bill of 2009 would cap unemployment at 8% and Americans would start to see improvement. Experts have been saying we can expect the jobless market to go up, not decrease, over the next 3 months despite this minor growth in numbers.

PUBLISHED UNEMPLOYMENT RATE GREAT DEPRESSION

The news comes as a surprise this morning since Americans were worried we might be headed for another Great Depression. If you look at historical data, you will find the unemployment rate reached an all time high of 24.9 percent in the 1930's when the United States entered The Great Depression. In 1923 to 1929 it was as low as 3.3 percent until it jumped to 15.9 percent in 1931. By 1933 it reached 24.9 percent. That pales in comparison to the 9.7 percent that was reported today. Or does it? Over 8.4 million people have lost their jobs since December of 2007.

DRAMATIC DIFFERENCE IN CALCULATIONS

If you look at the way unemployment was calculated in the 1930's, you will find that the numbers we use today to calculate unemployment are dramatically different. Here is how:

CHILD WORKERS NOT COUNTED TODAY
In the 1930's, when they calculated unemployment they were including a workforce of children, including those who were just 14 and 15 years old. Because of child labor laws, only those 16 and older who have already entered the work force are counted today.

SELF EMPLOYED NOT COUNTED TODAY
Those who are considered self-employed today have also been eliminated from the percentages of the workforce that were included in the percentages in the 1930's.

THOSE NOT ACTIVELY SEEKING WORK, ALSO NOT COUNTED
(People whose benefits have run out and they stopped reporting active job search)
In addition, they are now eliminating those who are not actively searching for employment. If a person gives up on looking for a job and does not report to the unemployment office, for example, when their benefits have run out and they can't draw a payment any longer, they are no longer counted in the figures today. Because of the extended unemployment, this could be a relatively high number of individuals this month.

APPROXIMATE CHANGE IN CALCULATION
When you take into account these three factors alone in addition to some other minor factors, "current unemployment numbers would be between 5% and 10% higher if calculated in the same way as in the past; conversely, the numbers from the 1930s and 1940s would be 5% - 10% lower if calculated using our contemporary methods."

As a result, if you reduce the unemployment rate during the Great Depression from 24.9 percent by 10 percent (in order to compare apples to apples), the unemployment rate during the Great Depression (as calculated today) would have been 14.9 percent. That is just 5.2 percent higher than the published rate today. That is also 1.6 percent lower than what analysts are saying is the real rate of unemployment today.

GETTING OUT OF THIS MESS
It took nearly a decade to get unemployment from over 24 percent to under a published 10 percent in 1941. In 1942, unemployment finally dropped to 4.7% as the U.S. entered into World War II.

What brought us out of the Great Depression?

Some say it was the war that created jobs which is why Scott Brown is so focused on "Jobs, jobs, jobs." This is definitely the answer, one of which an earmarked stimulus bill will not correct. Newt Gingrich on Hannity said the answer to the problem is not ""spend more, tax more, borrow more," which he said was Obama's policy. Gingrich said it doesn't work. He said we need to "give tax cuts to small businesses who create jobs." When talking about President Obama, Gingrich said, "I think he loses a lot of credibility" he has "great rhetoric but no reality" and "no real approach."

One approach would have been to utilize stimulus money for production instead of construction. We need to get people working and buying. Our taxpayer dollars should have been spent more wisely and should have been considered at length before throwing money at the economy. We would have seen bigger job gains from production.

The Democrats ratings have taken a huge dive for the way they have handled the economy. Closed-door policies, over spending, and poor decision making are getting a lot of attention and fingers are pointing. The rising unemployment rate is not helping. But the American people are taking things into their own hands. They are sending a message to Washington with the recent election of Republican Scott Brown who was elected in a predominantly Democratic state to take over Kennedy's vacant seat. The dramatic statement is, "We the People" just can't take it anymore. We need a CHANGE!

SOURCES:

T.H. Watkins, The Great Depression: America in the 1930s (New York: Little, Brown and Company, 1993)

The Behavior of Unemployment: http://www.bls.gov/opub/cwc/cm20030124ar03p1.htm