During the Great Depression the unemployment rate hit 25%. We're flirting with 9% in California. But can you compare unemployment rates across the decades?

Obviously the unemployment rate doesn't include anyone who stopped looking for work, so it tends to understate things. That distortion is often discussed. But there's also a problem in comparing the rate across decades. There has been a huge surge in the number of small businesses over the past fifty years. Many are the "buy yourself a job" type, meaning your income during good years will be about the same as if you had a normal job and salary. But what happens if the economy sours and all of those people who appear to be working at their small businesses are actually using their savings to stay afloat? Can you really call those people employed?

I would argue that any self-employed person, and any small business owner who is losing money, or using savings to stay afloat, is functionally unemployed, or at least underemployed. I wonder what the unemployment rate would be if you included those people, so you had a better apples-to-apples comparison with the Great Depression.
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Oct 16, 2009
There's always hope. What we are currently facing is just a challenge. A big challenge that we must overcome. Economic crisis has brought unemployment everywhere in the world that's why more families losses some of their properties. And it also brought up economic stress. The Economic Stress Index is still high but it is starting to dip. The unemployment rate is also starting to trend downward, in that fewer people are being laid off, but not everyone is hiring. Credit card lenders and mortgage lenders, however will be playing it safe, so despite the leveling off of the <a rev="vote for" title="New Poll Shows that Debt Relief is On The Way" href="http://personalmoneystore.com/moneyblog/2009/10/06/poll-shows-debt-relief/ ">Economic Stress Index</a>, the credit industry is still in need of debt relief. We can do it.
Mar 25, 2009
While Unemployed, I made a shirt that says "Unemployment? More like Fun Enjoyment" you should check it out!

Mar 15, 2009
John Williams, a trade economist, has a website (www.shadowstats.com) where he calculates the unemployment rate based on pre-1994 methodology. He has estimated this pre-1994 unemployment rate methodology (which is not quite the same data series as the Great Depression, for many reasons, which he documents on the website) would be in the high teens right now. Scott's general point is correct.
Mar 14, 2009
That's a really good question, Scott. As far as I can tell the DOL used the same measure today as it did in the 1930's. With that in mind, I have no reason to believe we are nowhere as bad off now as we were in the depression. When it comes to talking about labor and employment figures, the Republican in me comes out. I really do think the MSM is hyping this way too much, and it's causing people to believe that things are a lot worse then they are, causing a "mental recession". It take people realizing that they are empowered to get the economy going and realizing that the fate of the country does not rest entirely in President Obama's hands; he, just like us, is only one man, and it will take a collective effort for us to begin the recovery, which I think is beginning to happen.
+1 Rank Up Rank Down
Mar 11, 2009
As someone who is self employed...unemployment insurance (like worker's comp) is expensive and, if you own the business, you are allowed to opt out. As a cost-cutting measure, many small businesses choose to not incur those expenses or the opportunity to claim benefits. So, ummm, no one would KNOW if we were unemployed, as no benefits are there, no claims to be filed or claimed. We own a construction company and we are the ONLY company that has a project going inside city limits. When it is finished, however, there is no other work in sight.

(And Scott, FOUR Years? We do top quality work and never spend more than one year on any job. My house took six weeks from concrete to final. Yes, six WEEKS.)
Mar 10, 2009
Mar 10, 2009
I'm sure the recession can be explained by the fact people spend so much time on computers these days - which means they aren't spending money elsewhere.

Computers use primaries like copper, silicon, which helps mining companies but usually in other countries. Most of the rest of their value is IP - meaning a few people get very rich as opposed to many getting slightly affluent.

So the money is either flowing out of the country or it is clustering among a few tycoons.

This isn't true across the board for all products, but true enough for a significant percentage - (the effect it's having is a percentage too).

Solutions to this would be to tax imports of primary materials.

IP is tricky - with computers you get mass production techniques built in - particularly with software - write once, copy many times. Same with music and movies and other digital products. You get fewer people clipping the ticket - no middlemen, low cost transport/export. End result is lower prices which benefits consumers in short term, but means less money is generated for the economy.

In some ways the solution could be to remove the restrictions of patent and copyright protections. Then anyone who copied something or transported it over the internet could claim a fee. That will come once it reaches saturation and there is so much junk software, crap music, movies, etc out there that individuals won't be able to sort through it even though its all free, so the money they pay will be those who distill it down and link to quality - dj's playlists, etc.

But that would only be true if we have the goal of a stimulated economy where everyone circulates money and gives it to each other - which is really something people are going to start questioning eventually.

At the moment what is happening over time is that people are working less and less hard to get the same money - that way everyone contributes largely equally.

In our lifetimes we'll see a situation where labour is virtually replaced by machines, and thinking is too.

Taken to it's logical conclusion, the ultimate goal of capitalism is for 1 person to get all the worlds money. But even then its only useful if they spend it to get others to do their bidding. But the real problem is that that person won't be happy if everyone else has a decent lifestyle despite them.
0 Rank Up Rank Down
Mar 10, 2009
it really sends the chill throughout the spine..........

<a href="http://qtp.blogspot.com">Sachin</a>
Mar 9, 2009
This seems to be the last in the line of "The sky is falling" blog posts. Comparing the US now to the Great Depression is just totally stupid. Please Scott, do some hard thinking, read some Cato Institute articles, blog funnier, less doom-sayer.

Hardship for most people is nowonly having 1 42" TV, or an SUV that's from 3 years ago.

In the GD there were soup lines, itinerant workers, starving people. Now I hear people can't change jobs because they're upside down on their mortgage (thanks NPR). That's not the same as "thrown out on the street with no job, carrying their stuff into the country to look for work".

Now people are worried they can't afford the latest gizmos or their cell phone bill. GD, couldn't afford food AND clothing. Phones, who has one of those?

Now can't afford expensive modern drugs and surgery. Then no modern drugs or surgery, but couldn't even afford sterile bandages.

The sky has not fallen, we will not end up in some strange post-apocalyptic world where we have technology but can't afford to use it. Not going to happen. Unless we tax ourselves to death "stimulating" the economy, then maybe the once great USA will learn why the Soviet Union collapsed.

One thing to note, is disasters hit less hard amongst the wealthy (such as Americans). One image that is burned in my brain is after a severe wind storm in Minnesota, there were trees fallen, houses broken, power out. So, people were inconvenienced, but as I drove through the affected areas, each house had at least 1, often more chainsaws running, people had pick-ups full of debris ready to haul away. Many houses had emergency or camping generators running to get some power. It's then that I realised that in the aftermath of disaster, the clean-up is much quicker and easier for the wealthy.

Disclaimer: I live in Australia, but have spent 7 adult years living in the USA. Australia seems to be reacting in a similar manner to the US, so same arguments go here.
Mar 9, 2009
Before your new blog, i would always read comments. Most were very liberal and often uninformed, but sprinkled among these were a few conservatives. also often uninformed. But rarely was there ever a post without one comment to counteract you those before it

i have noticed on your new blog, you are getting much less comments. and among these it appears to be conservative neigh sayers. its interesting how california conformed to liveralism, but ended up with a massive debt and unemployment rate.

back to the original point, the few enlightened posts are now gone. disapointing yes, but it explains while you see more liberals at debates.

the conservatives are all working
+1 Rank Up Rank Down
Mar 9, 2009
Using the Depression era definition of unemployment, the current rate would be about 19%, nearly the same as neepster's "U-6 as of Feb 2009 stood at 16% ...." http://www.reuters.com/article/marketsNews/idUSN0944970920090309
Mar 9, 2009
I own a small business, but I am not quite unemployed: call it "underemployed."
My computer repair business can technically make a profit on as little as 2 hours per week. I average about ten hours, which brings in almost as much money (at $90/hr) as I would make in a regular desktop support job... other than benefits, that is. My wife works for the electric company, so not having my own health insurance actually benefits us: her insurance is my primary coverage.

If I can take advantage of the Greater Depression by fixing computers that would normally be replaced, thus billing about three more hours per week, I'll be fine. OTOH, if I drop down to seven or eight hours per week, I'll be under pressure to Get a Job... which is damn near impossible right now.
-1 Rank Up Rank Down
Mar 9, 2009
Mar 9, 2009
Lots of people have mentioned the multiple incomes per family, but not the multiple families per house that are becoming more common, and don't forget that now people tend to be more multi-functional in their jobs skills. In the '30's few people had any skills beyond what they did for a living, now many have job-jumped or even career-jumped a half-dozen times before middle age. And no more stacking everything on the old pickup to move out of state, you can now ship all your belongings UPS.
+1 Rank Up Rank Down
Mar 9, 2009
I think the other thing that should be considered is that at the time of the Great Depression, households typically had a sole breadwinner. At that time, the impact of 25% being unemployed meant that 25% of all families were impacted.
Mar 9, 2009
"...all of those people who appear to be working at their small businesses are actually using their savings to stay afloat? Can you really call those people employed?"

To be consistent, if those people are not considered "employed," then people that work for corporations that are losing money and sliding toward insolvency (the banks?) need to classified the same way.
Bottom Line: Unemployment status is not defined by the profitability of the underlying business.
0 Rank Up Rank Down
Mar 9, 2009
Why would you believe that the current situation is materially different (n the therms that you suggest) than the "Great Depression?" I think that ZachisMean hit the nail on the head.
Mar 9, 2009
That's why you should always look at the labor force participation rate when you look at unemployment.
Mar 9, 2009
What should self-employed person do now? Work more (16 hours / day, like in the begining of the business carrier), find hiden money reserves (in pillows etc.) and wait till the economy recover... I know, what I'm talking about :)
Anyway, we are used to not being supported by gvernment, are we?
0 Rank Up Rank Down
Mar 9, 2009
"There has been a huge surge in the number of small businesses over the past fifty years." Do you have data that supports this claim?
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