Unemployment in the United States is at one of the lowest rates since World War II. In July, the economy added 528,000 jobs and the jobless rate dropped to 3.5% The economy has replaced all the jobs lost due to the COVID-19 pandemic. The jobless rate was last at 3.5% in February 2020. By that April, it rose to 14.7%, the peak level during the downturn. This was nowhere close to the worst level in the past 100 years.
There are concerns that America has hit a new recession, largely due to inflation. So far, many economists believe the country cannot be in a downturn, however. A jobless rate of 3.5% means the economy must be robust. On the other side of this argument is that the gross domestic product (GDP) has declined in the past two quarters and inflation has started to eat at consumer spending.
The worst annual unemployment levels in the past few decades by far was 9.9% in 2009, the worst period of the Great Recession. In a sign of the overall resilience of the American economy, the jobless rate improved each of the next 10 years and hit 3.6% in 2019.
While these figures bracket the high and low monthly jobless rate of the past 16 years, they say little about jobless rates in the past century. The Great Depression drove the unemployment rate to an unimaginable level. In 1933, the number was 24.9%. The figure was above 20% in each year from 1932 to 1935.
It is almost impossible for American unemployment to move back toward 20%. The federal government has created too many safety nets. One is simply supplementing the incomes of people out of work. This keeps consumer demand reasonably high and prevents sharp drops in GDP. The Federal Reserve has shown the effectiveness of extremely low interest rates as a means to hold consumer and business activity from plunging.
The chance that U.S. unemployment rates will rise above 20% again is zero.
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