Unemployment During the Great Depression: Are We Getting Close?

Posted by Kristina Cowan

Each week delivers more grim news about some part of the economy, including job cuts and climbing unemployment. All the gloom-and-doom has some recalling unemployment during the Great Depression. At this point the U.S. unemployment rate is 6.7 percent, according to the Bureau of Labor Statistics; peak unemployment during the Great Depression was 25 percent. Are we inching toward a similarly unsavory fate?

Some say it wouldn't be impossible. Henry Blodget noted on Yahoo Finance that unemployment during the Great Depression climbed from less than 5 percent in 1929 to its 25-percent high in 1933. The downward spiral was an incremental one. He also said if we calculated unemployment the same way we did during the Great Depression, "our unemployment rate would be much higher."

Others offer a different take. Donald Luskin, chief investment officer of Trend Macrolytics, an economics consulting firm serving institutional investors, wrote in a piece in SmartMoney that the current recession is nowhere near as dire as the Great Depression because our political and financial leaders aren't making the same mistakes, including tax hikes, protectionism, bank failures and tight money.

Unemployment During the Great Depression May Have Been Worse, But a Bumpy Road Awaits

Whether we'll reach the levels of unemployment during the Great Depression is yet unknown, but many experts say the situation will get worse before it improves. Federal Reserve Bank of Dallas President Richard Fisher indicated this week he thinks unemployment will reach 8 percent and may surpass it. According to a Wall Street Journal story, "Mr. Fisher said he expects the economy will contract through 'at least' the first half of next year, as many forecasters also predict."

Heidi Shierholz, an economist at the Economic Policy Institute in Washington, said in an interview in late October that we wouldn't likely reach the 25-percent unemployment of the Great Depression, but that family incomes wouldn't recover for a few years. Earlier this month, Shierholz said that to have a better understanding of what's happening with the job market, it's important to consider the underemployment rate--not just the unemployment rate. Underemployment includes workers who report wanting a job and being available to work, but they're no longer actively seeking work. It also includes involuntary part-time workers, those who want but can't get full-time work. The November underemployment rate was about 12.5 percent, or 19.6 million, according to Shierholz.

She also pointed to the employment rate for men--who typically have higher rates than women--as an indicator of how strained the job market is. In November, the employment rate for men was 67.5 percent, the lowest it has been since 1948, when the Labor Department started collecting the data. 

Meanwhile, employment consulting firm Watson Wyatt has released a survey showing 23 percent of companies planning layoffs in the next year, and 39 percent having already done so.

The pain is widespread. But Shierholz offered a glimmer of hope. "I think 2009 is going to be a rough year, and hopefully we will pass a good stimulus package, and hopefully things will take hold and change in 2010," she said. "Even in a deep recession, most people will keep their jobs, even if unemployment reaches 10 percent. We are facing a huge crisis, but it's not a total collapse."

• Current Recession Is No Great Depression (SmartMoney)
• Great Depression Unemployment Didn't Hit 25 Percent Overnight (Yahoo Finance)
• The Employment Situation: November 2008 (Bureau of Labor Statistics release)
• Historical Perspectives on the Current Economic and Financial Crisis (Richard W. Fisher's remarks to the World Affairs Council of Dallas/Fort Worth and the Dallas Committee on Foreign Relations)
• Jobless claims ease, but still at higher levels (Reuters)
• Jobless Claims Fall but Remain High (The Wall Street Journal)
• Recession Forcing More Companies to Make Changes to HR Programs, Watson Wyatt Survey Finds (Watson Wyatt release)
• The Layoff Kings: The Companies That Cut The Most In 2008 (MarketWatch)
• U.S. Unemployment Rates Under President Bush Continue to Climb (The Salary Reporter)

Comments

[susan]

There are still high paying jobs on certain job sites, here's 3 from about.com's top ten job sites-

www.linkedin.com (professional networking)
www.indeed.com (aggregated listings)
www.realmatch.com (matches jobs on your skills)

good luck to those looking.

[jobseeker]

There is even a job site called the Ladders that focuses on jobs paying over $100,000.

See http://www.theladders.com

[Heather]

It is a depression as far as I'm concerned. I graduated with a JD in 2003. We were the first class hit hard by 9-11 as the class of 2002 had jobs lined up already but employers didn't hire much at all in 2003. It took me a year and a half to find a job in the legal field that paid horribly. When I finally got the courage to move on to a better paying job, it didn't work out and I found myself out of work as a recession hit. That was in late April of last year. 9 months out of work and still counting. I can't be the only one who has struggled so much for so many years. So forget what is happening just recently and what all the experts are telling you. Things have been really bad for a really long time. We just didn't want to face it until we had to face it and now we can't escape the truth.

[stilllooking]

I have been looking for a position for 2 years, 5 months, and 1 week. I did everything I was supposed to do to move forward in my field: Went back to school and got my BS at age 49 then went on to become professionally certified. Right now I'm doing temporary clerical work. My husband has been unemployed for three years. Guess what -- he was in the mortgage industry! So, yes we are struggling. Hopefully things will change soon because we can't hold out much longer!

[Coppington]

We had a low level IT job posted in our department. A computer technician starting at 33K, with an all-second-shift and weekends schedule. We received over 500 applicants, with some applicants being grossly overqualified (unemployed LAN administrators for example).

At one time there were jobs begging for these people...what happened? Even a few years back, we would have received probably 50 applicants for this technician job. I work in a public library, and know of several part-timers (in-house) who would like full-time position but can't find one.

[Brandon Bandlow]

This may not be the Great Depression but it is certainly more diffucult today than it was back then.
Today there are more mouths to feed and our country has relied on credit to sustain our economy, and now that credit has run dry and we are indebt. We ar printing money that, in my eyes, has no real value. Again it is like credit with nothing to back it.

This era will surely go down in the history books as the worse depression to date. Crime will increase along with violence and we probably will experiece a very grey time for a while.

I believe it will turn around someday though, when exactly.....who knows.

[citlali&angel]

i thinks thiz is all so veryy saddd

[anonymous]

yes, i agree with coppington...
in my school district all funding for sports has been dropped as well as funding for the music programs. the music programs will still survive because of private donations. with sports, if one school in the league cant afford to privately support a specific team sport (i.e. soccer or wrestling), that sport will be cancelled for the year and possibly more years to come. if this happens, which it most likely will, many students who usually participate in sports will be out doing other things that are less constuctive and possibly even more destructive to themselves and others.

this is just my opinion on the matter.

[anonymous]

sorry, i meant brandon bandlow

whoops

[hahaha!!]

this is werid! why do people really read this stuff, i mean im just on here for a schhool think. please you got better things to do people hehe