Friday, May 8, 2009
Unemployment is painfully high, but it's been worse. Using conservation assumptions--that job losses add up to another 2 million over the next 6-12 months and the labor force grows at its long-term average rate of 1%--I come up with an unemployment rate of about 10%. I think that will prove to be the peak, and there is a decent chance, based on the slowdown in the rate of losses in the household survey of jobs and the slowdown in weekly unemployment claims, that the peak rate of unemployment will be a bit less than 10%.
The second chart is the Misery Index, made famous in the late 1970s, which is the sum of the unemployment and inflation rates. As the second chart shows, the Misery Index is much lower today than it was two decades ago. This has been a painful recession, but nothing like what we lived through back then, when inflation was in the double digits.
Posted by Scott Grannis at 6:50 PM