How High Will the Unemployment Rate Go?

Definitely over 10% and must likely over 11%. The current “official” unemployment rate stands at 9.4%. This is quite high and will go higher for quite some time. Initial jobless claims rose by 15,000 to 627,000 in the week ended June 20, from a revised 612,000 the week before. This was higher than expected. With recently graduated college and high schools students not finding jobs, the unemployment rate should take another large jump in June probably to 9.8% or higher. Unemployment has been trending higher since Jan 2007 (see figure below).

This recession we are currently in will likely be the worst of the post-WWII era in the United States. The worst economic downturn of the post-WWII era before this one was the recession of the late-1970s and early 1980s when the Federal Reserve drastically increased interest rates to stop the double-digit inflation. I thought it would be interesting to compare unemployment trends of this recession to the recession of the early 1980s (see figure below).

During the early 1980s recession the unemployment rate peaked at 10.8%. I have a feeling the peak unemployment rate will be higher than the peak of the early 1980s recession. Call it an educated guess.

Links:

Today’s Initial Jobless Claims Number:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a2FSfQKl0pnQ

Department of Labor Unemployment Statistics:
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_id=LNS14000000

College Grads Not Finding Jobs:
http://wcco.com/consumer/College.Graduates.Face.2.1039686.html

U.S. News and World Report on Obama Stimulus:
http://www.usnews.com/blogs/peter-roff/2009/06/08/unemployment-numbers-show-obamas-stimulus-is-sinking-with-the-economy.html