Are We Experiencing Depression-Level Unemployment?

The government bandies around scary figures concerning rising unemployment. But those figures are still well below those suffered during the Great Depression.


Well, it depends.

The official unemployment reports of the Department of Labor’s Bureau of Labor Statistics provide conventional “U-3” figures and various alternative measures including “U-6”. For example, as of December 2008, U-3 unemployment was 7.2 percent, while U-6 was 13.5 percent. (U-6 is actually more accurate, because it includes those who would like full-time work, but can only find part-time work, or have given up looking for work altogether).

The U-6 unemployment rate is therefore almost double the more commonly-cited U-3 figures.

But those in the know argue that the real rate is actually higher.

For example, leading economist John Williams and Paul Craig Robertsformer Assistant Secretary of the Treasury and former editor of the Wall Street Journal – both say that if the unemployment rate was calculated as it was during the Great Depression, today’s figure would actually be 17.5%.

Indeed, according to an article summarizing the projections of former International Monetary Fund Chief Economist and Harvard University Economics Professor Kenneth Rogoff and University of Maryland Economics Professor Carmen Reinhart, U-6 unemployment could rise to 22% within the next 4 years or so.

So what are the best unemployment estimates? And where will the unemployment numbers end up?

I’m not sure. But when you scratch the surface of the “official” U-3 figures and measure things the way they were measured in the ’30’s – and when you remember that the worst unemployment numbers did not occur until 1933, 4 years after the 1929 crash – these sure sound like Depression-level unemployment figures.

Indeed, as shown in this chart, unemployment percentages may already be worse than they were during the start of the Great Depression.

And see this.

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