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.

Figure your After Tax Hourly Wage

A while ago one of my friends was working very long hours. He had pretty good pay and was making something around $90,000 but he was required to work about 60 hours a week and he was on call a lot. We'd go out to dinner and his pager would bleep away and he'd be typing out responses. When he was on call he'd probably a few pages an evening. Some days he'd be on call 24 hours so he might be required to get out of bed at 2AM to go plug in his computer and dial in to do some remote work from home. Don't get me wrong $90,000 is a lot of money so its hard to complain too much. But by comparison to my friend: I work for the same company, I have less education, I have less responsibility and stress, I work 40 hours a week give or take and I am never on call yet I make just as much money as he does. Clearly my friend's job wasn't compensating him well for all the work he did. Its important to compare the hours worked and the salary to see the the hourly rate for a job and not just look at the total salary.

Lets just estimate that he and I both make $90,000. Its not exact but close enough for discussion. He worked 60 hours and I worked 40 hours. On an hourly basis he made about $30/hour and I made about $45/hr. Our gross income was the same but on an hourly basis I was making 50% more than he was. Thankfully my friend has since moved to a better position at work and now he works a lot closer to a regular 40 hour /week job.

Lets look at another example. Say two recent college graduates are pursuing different careers. One has just finished a math degree and is going to start as a teacher. They are making $35,000 a year. The other person has an engineering degree and their starting pay is $55,000. The teacher works 8 hour shifts for 189 days a year or 1,512 hours a year. The engineer works 8 hour shifts 240 days for 1,920 hours / year. On an hourly basis the teacher is making $23.15 /hr and the engineer is pulling in $28.65/hr. Clearly the engineer is doing better. But lets look at the situation if the engineer works 50 hour weeks rather than 40 hour weeks. That would result in a total of 2,400 hours a year and their $55,000 salary would give them an hourly rate of $22.92 /hr. In this situation the engineer is making less per hour than the teacher.

	Teacher	Engr at 40hr	Engr at 50hr
Salary	$35,000	$55,000	$55,000
Hours worked	1,512	1,920	2,400
Hourly rate	$23.15	$28.65	$22.92

Of course its also possible that the teacher could be working 10 hour days and the engineer might work 8 hour days. There is also an advantage to having a higher gross salary as it will provide a higher standard of living. But does a higher overall pay come at the expense of high stress and burning yourself out spending most of your days at work?

Next time you're looking at a job make sure to figure out how the hourly pay would look.

Best of blog posts for week of May 8th

Get Rich Slowly discusses the book Negotiating Your Salary: How to Make $1,000 a Minute
This would probably be worth it for me to check out if at any time I'm in the job market again. I don't think I did a particularly good job negotiating for my wages when I started work at my present job.

The Money Tips Network was launched. Its a network of several very good personal finance bloggers including all my favorites. So if you're looking for a good single source for personal finance blog articles this would be a good one.

Free Money Finance is having a drawing to give away A Box of Books To be eligible for the contest you have to sign up for his newsletter.

Trent at The Simple Dollar posted his free personal finance ebook : Everything You Ever Really Needed to Know About Personal Finance On Just One Page

Get Rich Slowly features a guest article from Motley Fool writer about the annual Berkshire Hathaway stockholder meeting and Three Lessons from Warren Buffett

Postage going up 2¢ on Monday, May 11 - Buy Forever stamps Now

Postal rates are going up to 44¢ for regular first class letters. Thats a 2¢ increase. If you know you'll need some stamps next year then right now is a good time to go buy some Forever stamps. You could get a sheet of the Forever stamps today for 42¢ and then next week they'll be worth 44¢. You can buy Forever stamps online at the USPS site or at various local retailers.

I wouldn't go out of my way to buy a big pile of stamps. But if you know you'll be using a few within the next year then it could save you a few bucks to lock in the 42¢ cost before the rate goes up on Monday.

Image from USPS.gov