At 9.7 percent, the U.S. experienced the highest unemployment rate in 1982 since the Great Depression. Is it that bad today?
The official February 2009 rate of 8.1 percent suggests things aren’t as bad as ’82, but new research from the Center for Economic and Policy Research suggests otherwise – a comparable rate of 9.5 percent.
“Putting the February 2009 unemployment rate on a basis that is more directly comparable to the unemployment rate in 1982, the current rate rises from 8.1 percentage points to 9.5 percentage points, just 0.2 percentage points below the 9.7 percent average for 1982,” writes John Schmitt and Dean Baker, authors of the new report, “Is the U.S. Unemployment Rate Today Already as High as It Was in 1982?”
The official unemployment rate, according to the Center, is not taking into account two important differences between the ’82 unemployment rate and today. The first is demographic.
According to analysts, younger people typically maintain the greatest unemployment rate. In 1982, baby boomers – who would have been in their 20s and 30s – accounted for the highest unemployment rate while having the highest share of the labor force. That trend still exists today – with one exception. Boomers maintain the highest share of the labor force but have the lowest unemployment rate at an average 3.9 percent, based on the Center’s weighted statistics.
“In 1982, the US population was substantially younger than it is today,” according to the report. “Even in an otherwise identical economy, we would expect a younger population to have a higher unemployment rate than an older population would.”
The second difference is statistical. The Current Population Survey (CPS) – the main survey used to measure the unemployment rate – is reaching a smaller portion of the population today versus 1982. It’s likely to miss people who are not employed, according to the Center. “As a result, the official unemployment rate understates the unemployment rate today relative to 1982.”
“The aging of the US population and the reduction in coverage rates of the main US labor-market survey mean that the official unemployment rate does not provide a completely consistent basis for comparing labor-market slack between the early 1980s recession and the current economic downturn,” Schmitt and Baker write. “The current unemployment rate, therefore, is nearly identical to the rate reached in the year with the highest annual unemployment rate in the postwar period.”