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The Weekend Edition of the Wall Street Journal for December 6-7 features a front page story headlined "Job Losses Worst since '74: 533,000 Shed in November."
As the Journal reported, nonfarm payrolls declined 533,000 for the month, which was the largest one-month drop since 1974. The newspaper went on to say that revisions to earlier figures showed that employers shed almost 1.3 million jobs since September. In addition, the tally of 1.9 million jobs pared thus far in 2008 surpasses the losses of the past two recessions, signaling that the current downturn could be the worst since the years immediately following World War II. While such headlines are certainly attention getters, a key piece of information is missing that would put the current job losses in proper perspective—the size of the labor force. In December 1974, total nonfarm employment decreased by 602,000, slightly more than the one-month drop in November of this year. But, the labor force at that time was 93 million, as opposed to 155 million today, or two-thirds larger. A better measure for contrasting the employment situation is the unemployment rate, the percentage of labor force who are unemployed. As shown in the accompanying chart, the current rate of 6.7 percent is not out of line with the experience of other 10 post World War II recessions. The unemployment rate for those 10 downturns averaged 7.6 percent. Thus far, the recession has not been extraordinary in terms of employment changes.
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