To obtain a better perspective on unemployment during past recessions, below is a chart of continuing claims (those who continue to receive weekly benefits) dating back to 1971. (Click on chart for larger image)
Looking at the chart, the line shows continuing claims as reported each week. You can see that the last several months have been clustered in the 4.5 million range after spiking to over 6 million in 2009. Let's take a look back at the last three recessions to gain a better understanding of past cycles.
The early 1980's recession officially lasted from January 1980 until November 1982. As you can see on the chart the peak in continuing claims came in November 1982. The continuing claims dropped significantly over the next two years as the economy experienced a robust recovery. Economic growth was spurred by the Fed lowering interest rates and Congress reducing tax rates.
The early 1990's recession officially lasted from July 1990 until March 1991. Reviewing the chart we can see that the peak in continuing claims occurred in the first quarter of 1991. Although the recession ended in the beginning of 1991, it wasn't until the second half of 1992 (when continuing claims dropped) that the economy began a recovery.
The early 2000's recession lasted from March 2001 until November 2001; again the recession ended as the continuing claims figured reached a peak. Unfortunately, the ensuing recovery was rather anemic and job creation was below past recovery levels. The economy didn't really gain meaningful traction until the end of first quarter of 2003, many months after the recession officially ended.
While we hope we begin to experience job creation and an improved employment picture, we believe it is possible the recovery may be very similar to the most recent recessions in the early 90's and 2000's; where continuing claims remain elevated or clustered for several quarters (in this case around the 4.5 million level) and economic growth experiences rather anemic trends until continuing claims begin to steadily decline. This statistic will be important to watch in the coming quarters.
