This post was originally written on 2020-05-10
Someone well-meaning asked me why I thought the current economic crisis might be different from the last recession, and why might we not see the recovery patterns from the 2009-2012 period. I suppose I feel it is different because of everything I read about the state of the economy these days, and because the one number I can chart – the unemployment rate – is not even close to what we have witnessed since 1948. Things could, and most likely will, get worse given that unemployment insurance claims are still rolling in; Ohio alone expects 150,000 filings from the self-employed alone. In any case, all speculation is useless. Let the historical data speak for themselves.
In years past, the peak unemployment rate was 10.8% in November 1982, at the height of the “Double Dip Recession” that spanned July 1981 to November 1982, a painful 16 months that came close on the heels of the oil-price shocks that began in the 1970s. The Great Recession marks the second highest peak of 10% hit in October of 2009 in a recessionary period that lasted 19 months (December 2007 through June 2009).
The current unemployment rate sits at 14.7%, a few percentage points below what was forecast, but several voices are cautiously forecasting that the rate will hover around 9.5% by the end of 2021. Many think this is an underestimate but let us assume that this prophecy comes to pass. This is the beginning of May 2020 so we may not settle back into single digits for 19 months. Prior to April 2020, the unemployment rate was in the double-digits in only 10 months, over a period going as far back as January 1948.
Employment in leisure and hospitality fell by 47% last month. The employment-population ratio, a barometer of the economy’s ability to create jobs, stands at a paltry 51.3, the lowest it has been since January 1948. One final sobering statistic: During the Great Recession we lost 8.7 million jobs; since mid-March we have lost 20.6 million jobs. In short, in roughly six weeks we lost almost 2.4 times the number of jobs lost over the course of the prior recession. Is this downturn different? Yes, I think so even as I hope I am wrong.
A closing caveat. I usually don’t read the fine print but this time I paid careful attention to what seems like an unusually lengthy and detailed ‘methods’ addendum at the foot of the Bureau of Labor Statistics (BLS) Economic News Release. Here, in addition to various other issues the BLS emphasizes that the household survey response rate was 13% below that in the preceding months, and not all workers who may otherwise have been classified as unemployed were so classified. I quote:
If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical April) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been almost 5 percentage points higher than reported (on a not seasonally adjusted basis).
The actual unemployment rate may well be closer to 19.7%, and even that may be an underestimate.