US Unemployment: Past Crises Comparisons

By in
US Unemployment: Past Crises Comparisons

We’ll take 2 cuts at the question of how quickly US unemployment will increase as many businesses – especially smaller ones – are forced to cut back in the wake of social distancing/other measures to combat COVID-19.

First up: an update on the Google Trends data for US “unemployment” searches over the last 7 days through today:

What we see/other related data:

  • Today’s “unemployment” search volumes are 10x higher than a week ago.
  • While it is not an exact comparison, it took all of 2008 (12 months) for “unemployment” queries to merely double.
  • Google searches for “unemployment” are rising quickly across the entire country. The top 5 states are: Nevada, Rhode Island, Ohio, Washington, and Pennsylvania.

Bottom line: this is why markets want a big fiscal stimulus package out of DC, and right now, because employers are firing workers at an unprecedented rate and this is not contained to just a handful of states.

Our other approach: a historical look at past crises and how quickly US unemployment increased:

  • October 1973 Saudi Oil embargo: a 0.5-point increase in the unemployment rate over the next 3 months (4.6% to 5.1%), 1.2 points over the next year (to 6.0%).
  • 1979 Oil Shock from the Iranian Revolution: a 0.4-point increase in the unemployment rate in the 3 months from May to August (5.6% to 6.0%), 1.9 points over the next year (to 7.5%).
  • August 1990 Iraqi invasion of Kuwait: a 0.4-point increase from July to October (5.5% to 5.9%) and 1.3 points over the next year (to 6.8%).
  • 9-11 Terror attacks: a 0.6-point increase over 3 months (4.9% to 5.5%) and 0.8 points over the next year (to 5.7%).
  • 2008 Financial Crisis: using our September 29th stock crash as a marker, unemployment rose 1.2 points over 3 months (6.1% to 7.3%) and 3.7 points over the next year (to 9.6%).

Bottom line: the average 3-month ramp in US unemployment directly after an economic shock is +0.6 points and a year later the jobless rate is on average 1.8 points higher.

Markets are clearly pricing in the idea that 2020 will see the fastest increase in US unemployment ever, something the Google Trend data seems to support. We will keep you updated as the week progresses.