How Long Will It Take For the Job Market To Fully Recover?
With the unemployment rate in the United States currently ticking upwards towards the 10% mark, many people are starting to ask the question - how long will it take for the jobless rate to fall back to pre-recession levels?
There is no easy way to predict this - there are so many different variables involved that trying to answer this question becomes a futile exercise.
However, one thing that we CAN do is look at past recessions in the United States and see how long it took the jobless rate to recover to pre-recession levels.
In this article, we'll be looking at four different recessions. They are:
2001-02 Recession (post 9/11)
1990-91 Recession (Gulf War era)
1981-82 Recession (Stagflation)
The Great Depression
1. 2001-02 Recession. This recession (technically) lasted from March '01 until November '01.
The United States went through a tremendous period of upheaval during this time (dot-com bust, 9/11, war in Afghanistan).
However, in terms of jobless rates in the United States, this recession was as weak as they come.
Prior to the recession starting in March of '01, the unemployment rate in the United States was around 4.3-4.4%.
The rate ticked as high as 6.3% in June of 2003, and then proceeded to steadily trend lower over the following years.
By late 2006 (October of 2006 to be precise), the unemployment rate in the United States had returned to pre-recession levels.
So, from start to finish, the unemployment rate took approximately 6 1/2 years to recover.
2. 1990-91 Recession. This recession lasted from July of 1990 until March of 1991.
Prior to the recession starting, the jobless rate in the United States was around 5.2%.
The jobless rate ended up hitting a high of 7.8% in June of 1992 before starting to trend lower.
The unemployment rate in the United States didn't fully recover until August of 1996 (5.1%).
Total Recovery Time: Just over six years.
3. 1981-82 Recession. This recession lasted from July 1981 until November of 1982.
In terms of overall severity, this recession is much more comparable to what we are currently going through.
Prior to this recession taking place, the US economy already had its share of problems (namely, the 1979 energy crisis that caused inflation and jobless rates in the United States to spike higher).
Before the recession technically got underway in July of 1981, the jobless rate in the United States was already up to 7.6%.
This helps to create a bit of an unfair comparison since unemployment rates in the country were already so high.
Because of that, we'll take the rate from April of 1979 (5.8%) and examine how long it took to fall back to this rate from July 1981 onwards.
The unemployment rate in the United States spiked to 10.8% in late 1982. The economy was in shambles at the time due to high inflation which was brought on by high energy prices.
The economy did recover though, helping Ronald Reagan to sweep to victory for a second term.
The unemployment rate in the United States dropped to 5.8% in November of 1987, meaning that it took just over 6 1/2 years to fully recover.
4. The Great Depression. Some people feel as though the Great Depression lasted from 1929 until 1932-33, however most feel as though it extended right through until the onset of WWII in 1939.
Prior to the "Great Depression", the unemployment rate in the United States was 3.14% (1929).
Just a few short years later, the unemployment rate in the US had topped 20% (23.6% in 1932, 24.9% in 1933).
The entry of United States into WWII really helped to dramatically decrease the unemployment rate in the country, and by 1943, the jobless rate was under 2%.
The "Great Recession" started in December of 2007.
In November of 2007, the unemployment rate in the United States was 4.7%.
Economists expect that the rate will top 10% in early 2010 before starting to trend lower.
How long will it take until the unemployment rate in the United States is below 5% again? It's tough to say, but based on past recessions, we could be in for a bit of a wait.
Will we see a full recovery by mid-2014? Earlier than that? Later?
Source: Historical Unemployment Rates in the United States
Wikipedia.org - List of Recessions in the United States
Filed under: General Knowledge