Debunking A Popular Phrase

One of the phrases that I have heard innumerable times is that our current period of economic weakness “isn’t as bad as The Great Depression because during The Great Depression unemployment was at 25%.”

While I have commented repeatedly on this blog that I don’t believe we should be equating our current economic condition to that of The Great Depression, I would like to comment on the phrase above.

As one can see on the chart found in this The Economist article:

the unemployment rate during The Great Depression peaked at 25%.  Also of note is the steady yet unrelenting climb in the rate leading to this peak.

Another issue that would need to be factored into any discussion of the two periods’ unemployment rates is that of comparibility.  While I haven’t seen any well-documented analysis of the methods used during each period, the prevailing wisdom appears to be that our current unemployment rate is understated vs. that used during The Great Depression. 

As I have stated previously on this blog, (on the “Why Aren’t Companies Hiring?” series that started on July 24) “The unemployment issue currently facing the country is severe and complex.”  It is important that we keep it in proper historical context.

SPX at 1005.73 as this post is written