Wednesday, January 7, 2009

Here's a scary thought...

...as if you needed one. The Labor Department releases its employment numbers for the month of December on Friday. The consensus among economists is for the number of unemployed to climb from 6.7% in November to 7.0%. A bad statistic to be sure, but nothing like the 25% that was the case during the Great Depression. This is one of the reasons people cite for not comparing our current slowdown with that of the 1930s.

But Henry Blodget, of dot-com fame, wrote an article on December 5 that throws a little cold water on this notion. He explains that first of all, the government calculates unemployment differently today. If anything, our current numbers would be higher if we used the same methodology as in the 30s. Secondly, that notorious 25% number was not reached until 1933. In 1929, the year of the stock market crash, unemployment was just under 5%. At the end of 1930, it was just under 10%. It climbed to 16% in 1931, 24% in 1932, and topped out at 25% in 1933. It then took 19 years to go back down to pre-crash levels.

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