May 11, 2009

Comparing Unemployment Increases During Recessions

I thought it would be interesting to look at the rate of increase in unemployment during this recession and compare it to previous recessions.

The BLS has monthly historic unemployment data. This CNBC article has a list of the recessions from the 20th century. So I pulled the monthly unemployment rate and then looked at the unemployment levels during the previous recessions. Then I charted the unemployment from the start of each recession until 6 months afterwards. The unemployment rate for each recession + 6 months is shown below.

The red line is the current recession. The yellow line is the July 1981- Nov. 1982 recession.

Looking at it another way I plotted the increase in unemployment from the start of the recession. The following chart shows the cumulative increase in unemployment from the start of each recession out through 6 months after the recession ended:

Again the current recession is in red. I highlighted three other recessions that had similar increases in unemployment. The Nov. 1948 - Oct. 1949 in yellow, July 1953 - May 1954 in green and August 1957 - April 1958 in light blue. Since this recession started the unemployment rate has gone up 3.3%. For each of those other 3 recessions the unemployment rate went up 3.1-3.4% in the first 10 months. The rate of increase in unemployment during the current recession is very similar to the rate of unemployment during the recessions in the late 40's and 50's.

The unemployment rate usually peaks at the end of the recession or within 3 months after the recession ends. In historical trends, if unemployment flattens off or starts to drop then thats a good indicator that the recession is ending. We haven't seen unemployment start to go down yet.

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