Unemployment Comparison

 by John B. Hagens

John has been with IPR since 1990, with activity in all of IPR's businesses. Prior to joining IPR, John was senior vice president for the WEFA Group, with responsibility for the company's U.S. economic forecasting service. Before his ten-year stint with Chase Econometrics (and then WEFA), John had jobs as senior economist for the Carter Administration's Council on Wage and Price Stability and for the Social Security Administration, the latter under a Brookings Institution Economic Policy Fellowship awarded while he was an economics professor at Colby College. John holds an undergraduate degree in mathematics and economics from Occidental College and a Ph.D. in economics from Cornell University.

Unemployment Comparison

At best, the economy has stalled. Pundits are evenly divided over whether or not we have entered another recession, but pundits almost never get the future right. What we do know is that 14 million people were defined as unemployed by the Bureau of Labor Statistics in August 2011. Millions more have stopped looking for work or have taken part time instead of full time positions. As the months go by, we digest the economic news and wonder when matters will brighten. It is sometimes forgotten that just ten years ago, before the boom-boom years of the housing market, the nation suffered from the bursting of the tech bubble and the shock of 9/11 and the U.S. jobs machine was also sputtering. The attached diagram compares the unemployment record during the first 31 months in office for Presidents Bush (red line) and Obama (blue line).

President Bush entered office In January 2001 with 6 million people unemployed, steadily rising rapidly and then more slowly to a peak of almost 9 million people by August of 2003. During this relatively mild recession period the unemployment rate rose from 4.2% to 6.1% as 2.9 million people became unemployed. Starting in September of 2003, the number of people unemployed gradually dropped, but after 43 months in office (August 2004) still stood 2 million above January 2001's level (5.4% unemployment rate).

President Obama began his term when the economy was in free fall as the collapse of the financial market in 2008 took its toll, reinforcing the housing-bust recession that began in late 2007. The unemployment rate was 7.8% and number unemployed was already a staggering 12 million in January 2009. Unemployment continued to rise rapidly before peaking at 15.6 million (10.1% unemployment rate) in October of 2009. In total 3.6 million jobs were lost during the first 10 months of Obama's presidency. Since this peak, the number unemployed has dropped, in fits and starts, by 1.6 million.

Determining the right policies to battle unemployment are debated endlessly, likely without resolution. Is a shortage of demand for goods and services the problem and will another round of fiscal expansion get employment growing again? Or is it uncertainty and excessive regulation and taxation that are holding back businesses from hiring more people? Or has the U.S. economy undergone a structural change, with the jobs lost unlikely to return as our workers are replaced by less costly foreign workers? What seems true is that the U.S. economy has recently taken a very long time to heal after a downturn and that finger pointing and holding to strident policy positions aren't productive in getting people back to work. Deploying policies that address all three questions seems most productive.