Should We Call It a Depression?

The “official” unemployment rate is around 10 percent. The media blew up in outrage when it was that high during the first year of the Reagan administration, but is now calling it a “recovery.” Fed official Dennis Lockhart recently stated that if people who have simply given up on finding a job (“discouraged workers” in governmentspeak) are counted, the actual unemployment rate is more like 16 percent. That would be comparable to the unemployment rate in Depression years 1931 (15.9%), 1936 (16.9%), 1937 (14.3%), and 1940 (14.6%).

Moreover, government miscalculated the unemployment rate during the Depression years by counting many government make-work employees as unemployed. As a result, economists think the unemployment rate might have been exaggerated by as much as 5 percentage points. That would make the 1940 Depression unemployment rate almost exactly what it is today, without counting the “discouraged workers.”