MSN Money Insight
| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.667500 |
| Euro to US Dollar | 1.500150 |
| Japanese Yen to US Dollar | 0.011325 |
| Canadian Dollar to US Dollar | 0.947957 |
What comes after 10% unemployment?
If the experience of the early 1980s is any guide, the answer is a recovery. But it might take time for the recovery to lower the jobless rate.
Today's big question: Is U.S. unemployment topping 10% the end of the world?
This is not a facetious question. Rather, it's important to put the unemployment rate into some context.
Only one other time since World War II has the U.S. unemployment rate topped 10% -- between September 1982 and June 1983. It briefly hit 9% in May 1975 and fell to 7.4% a year later.
The unemployment rate was -- as it usually is -- a laggard. It hit 10.1% in September 1982, moving up from 9.8% in August.
But the economy was, in fact, getting ready to recover.
The great bull market of the 1980s began in August 1982, and the Dow Jones ($INDU) jumped 51% from July 1982, just before the bull market began, through June 1983, the last month the employment rate was above 10%.
The gain in the Standard & Poor's 500 ($INX) over the same period was 56.5%, and the Nasdaq Composite ($COMPX) jumped 86%.
The economy, as measured by gross domestic product, was muddling along basically at break-even in summer 1982.
Then the economy began to surge in early 1983, fueled by tax cuts and, more importantly, substantial interest-rate cuts by the Federal Reserve.
By the end of 1983, the unemployment rate was down to 8.3% and dropped to 7.3% in 1984 and 7.0% in 1985.
Republicans paid a price when unemployment hit 10%. They lost control of the Senate, which they had won in 1980. They got their reward in 1984 when Ronald Reagan won a second term handily.
Here are the data:
| The last time unemployment hit 10% | |||||||||
| | | | Jobless rate | | Dow close* | | | GDP chg. ** | |
| Jun-82 | | | 9.60% | | | 811.94 | | | 2.20% |
| Jul-82 | | | 9.80% | | | 808.59 | | | |
| Aug-82 | | | 9.80% | | | 901.31 | | | |
| Sep-82 | | | 10.10% | | | 896.25 | | | -1.50% |
| Oct-82 | | | 10.40% | | | 991.07 | | | |
| Nov-82 | | | 10.80% | | | 1,039.28 | | | |
| Dec-82 | | | 10.80% | | | 1,046.54 | | | 0.30% |
| Jan-83 | | | 10.40% | | | 1,075.69 | | | |
| Feb-83 | | | 10.40% | | | 1,112.62 | | | |
| Mar-83 | | | 10.30% | | | 1,129.93 | | | 5.10% |
| Apr-83 | | | 10.20% | | | 1,226.19 | | | |
| May-83 | | | 10.10% | | | 1,200.08 | | | |
| Jun-83 | | | 10.10% | | | 1,221.35 | | | 9.30% |
| Jul-83 | | | 9.40% | | | 1,199.21 | | | |
| Aug-83 | | | 9.50% | | | 1,216.15 | | | |
| Sep-83 | | | 9.30% | | | 1,233.12 | | | 8.10% |
| Dec-83 | | | 8.30% | | | 1,258.63 | | | 8.50% |
| Dec-84 | | | 7.30% | | | 1,211.57 | | | 3.30% |
| * End of month close. ** GDP change: seasonally-adjusted | |||||||||
| annual rate for the quarter. | |||||||||
Remember Remember the Great Depression. After Hoover's and FDR's simulas and bailout packages the economy recovered slowly for a bit in the mid 30's then declined again. What we are seeing now is just a short term recovery, expect things to get worse before they get better.
Yes, unfortunately the dial goes to 11. (the movie Spinal Tap)
Comparing current levels of unemployment with past levels of unemployment ignores the fact that the world is a much different place now.
For a long time the US was the biggest player on the world economic stage. It was a manufacturing power house. We still have a manufacturing base, but it is nothing compared to say China's base. China also has a great deal of leverage now as compared to the past.
That is just one example.
It looks like Obama finally got the call at 3am that Hilary warned us about when we were attacked by this radical Islamic at Fort Hood.
Unfortunately ... it went to his answering machine.
And ... I would pay to see the look on Hassan's face when he wakes up expecting to see 72 Virgins waiting for him ... only to realize there are 72 Very Angry Army Guys waiting for him.
What jobs? There are no jobs.
The author talks about the 1983 recovery which was driven by cutting taxes and stopping government expansion. Am I missing something? All I see are piles of new spending and piles of new taxes.
OH I forgot, a huge federal deficit for my gen. Thanks again.
Taxing 1% of every trade is ludicrous. If someone worked hard to make $million, they owe NOBODY 1%, including the gov and unemployed.
Giving away money without demanding work in exchange (i.e. welfare) does nothing but create lazy people. Why would anyone work if everything is free? What if someone is unemployed because they were the first to get fired because they are a lazy worker who was just sucking off the company? Why reward that loser with free income? When times are tight, people can get food from friends and family, as well as shelter. Everybody could have double the people they do now move into their house...if they had to. There is plenty of beans and bread out there. Bailouts create a welfare state of mind....and that is NOT what our founding fathers created, and NOT why we are the richest country in the world. Like Europe and free healthcare? Move there....their standard of living is 40% below ours. Why? Their gove SPENDS 42% of their GDP (wealth redistribution). Ours USE to spend 27%...now we are headed to 48% by 2012. (ps..don't be an idiot and support this new healthcare bill).
If you are for taxing the rich to feed the poor...you haven't read your bible lately. Even Jesus said that you don't just give a man a fish...you teach him to fish (let people fend for themselves, don't coddle them).
StockScouter data provided by Gradient Analytics, Inc.
Quotes supplied by Interactive Data.
MSN Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.
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