Wednesday, 15 May 2013

One more chart on participation and unemployment rate...

As an addendum to the last post, on the left is a chart of the unemployment rate and the participation rate.  A somewhat useful comparison period to the dynamics going forward for the unemployment rate maybe the aftermath of the downturn in the early 1980s.  In that period, the unemployment rate quickly fell back to 7.5% in 1984, but didn't meaningfully crack the 7.0% rate until 1987, thanks to rising participation.  Jobs did grow, although was slow through 1986.

Of course the nature of that recession was much different, as it was largely induced by policy makers to tame inflation rather than the much more damaging balance sheet recession experienced currently. So if anything, the challenges are even greater currently and the likelihood of the unemployment rate continuing its recent rate of improvement even more remote.