If you take the raw numbers, the 1982-3 recession seems worse compared to the current depression: after all, during that time, unemployment stayed above ten percent for seven months. But that’s deceiving, because the composition of the workforce was different then–workers, on average were younger.
Here’s how today compares with 1982-3 when broken down by age:
For nearly every age cohort, unemployment is higher now than in the 80s. Since the workforce is older now, and unemployment is typically concentrated in younger workers, if we had the same population demography we did in the early 1980s, we would have a higher unemployment rate than we currently see:
If the labor force is adjusted to the (younger) age composition of the labor force during the 1982-83 peak, today’s unemployment rate is actually higher, not lower than it was in 1982-83.4 Figure 4 shows the age-adjusted unemployment rate since 1981.5
After adjusting for the aging of the population since the early 1980s, the current labor-market downturn has resulted in both a higher unemployment rate and a longer period when the rate of unemployment remained over 10 percent. The unemployment rate peaked in December of 1982 at 10.9 percent, yet fell to 9.9 percent by June of 1983. For seven months, the rate of unemployment held at over 10 percent. On the same age-adjusted basis, the unemployment rate has been over ten percent for thirteen consecutive months, including five months over 11.0 percent and reaching 11.2 percent in October of 2009. Over the last twelve months, the rate of unemployment has never fallen below 10.8 percent.
I think this explains, in part, why there is a disconnect between policy makers and the larger public about unemployment: for most people, the reality is that unemployment is worse than it was thirty years ago. When people compare their circumstances to their parents’, they realize they’re worse off. In many ways, this is an atypical firing pattern: older workers aren’t more secure. This also leads to economic insecurity among workers who are far more worried about this–younger workers can recover, are more flexible, have fewer obligations (e.g., mortgages) than older workers. Needless to say, this is politically combustible.
But I’m sure all that fiscal austerity will fix this in no time….