What Happened The Last Time The Unemployment Rate Dropped This Much

Tyler Durden's picture

One of the biggest accomplishments of the president, in his own words, is managing to push the official (U-3) unemployment rate, from its post-Lehman high of 10% hit in October 2009 to only 6.6% as of January 2014 as Friday's jobs report revealed. This rapid drop in unemployment - call it the "Obama Recovery" - caught none other than the Fed completely unaware, whose 6.5% unemployment rate tightening threshold is now in tatters, as it the credibility of the Fed's forward guidance as the Fed will have no choice but to scrap all unemployment QE ending, rate hiking "thresholds" at its next FOMC meeting.

So what happened to the unemployment rate that it dropped so fast it surprised and embarrassed even the "venerable" Federal Reserve, which had initially expected a 6.5% unemployment rate some time in 2015. To get the answer we go back in time to the last (and only previous) time when the US unemployment rate dropped from roughly 10%, which was in June 1983, to 6.6%, which took place three and half years later, in December 1986 - let's call it the "Reagan Recovery" in short.

Here is how the old normal compares to the "New Normal."

  • US unemployment dropped from 10.1% to 6.6% between June 1983 and December 1986: an interval of 43 months.
  • US unemployment dropped from 10.0% to 6.6% between October 2009 and January 2014: an interval of 52 months.

So far so good: one can expect the "Obama Recovery" from the Great Financial Crisis to take a little bit longer than "Reagan's."

But what about the internals. This is where things start getting weird.

First, we look at the number of actual jobs added (according to the Establishment survey) from the 10% point at the peak to the 6.6% at the bottom. What we find is that despite the US workforce being over 30% larger today than it was 28 years ago, it took far less actual jobs created to drop the unemployment rate by 3.4%. Specifically, while the "Reagan Recovery" resulted in the creation of 10.5 million jobs, the "Obama Recovery" achieved the same low unemployment rate with only 7.5 million jobs added.


The difference between the Old and New Normal is even more acute when one looks at the change in average monthly job gains over the "recovery" period: as noted, in 1986 the duration of the rate drop period was 43 months, where currently it has taken 52 months. This means that the Obama recovery has resulted in just 145K job additions on average per month while the unemployment rate has dipped from 10.0% to 6.6%, compared to the far more impressive 244K - and indicative of a real recovery - that marked the 1983-1986 period.


However, nowhere is the distinction more acute when comparing the two "recoveries", then when one looks at the underlying population and labor force trends.

First, here is what a normal recovery looks like: during the Reagan Years, the Civilian, Non-institutional population - or the total number of Americans eligible for work whether they are part of the labor force or not - increased by 7.4 million, while the labor force increased by 6.7 million - as close to a linear relationship as possible, and also a correlation which any rational person would expect.

So how about the Obama recovery: well, we find that between October 2009 and January 2014, the civilian, non-institutional population rose by 10.4 million, to be expected considering the far greater general population of the US - it is also a number which, on average, increases by about 230K or so every month. So what about the labor force? It is here that things get zany (as we predicted they would many years ago), because it is here that the Obama Recovery has somehow only managed to add a paltry 1.7 million people to the workforce: from 153.8 million to 155.5 million!


Of course, the above unleashes the avalanche of "demographic" excuses which we have all grown to know and laugh at, because when economists can't explain something, they promptly fall back to patently false "justifications" - recall that as we explained the collapse in the labor force has very little to do with demographics, something which the BLS itself thought as recently as 2004 when it projected a rising labor force participation into the coming years only to readjust it lower in the coming years.

The real reason for this ongoing collapse in the labor force, is the same that the CBO used to explain why - in politically correct terms - Obamacare will adversely impact the labor force over the next decade: Americans will have to earn less to get full coverage, or said otherwise, they are less incentivized to work more. This is precisely the US welfare state at work, and when one extends the Obamacare "rationale" one sees that the administration's core goal is to make increasingly more people reliant on handouts than on labor, as we explained in "When Work Is Punished: The Tragedy Of America's Welfare State" in which we showed why "for increasingly more in America, it is more lucrative to sit, do nothing, and collect various welfare entitlements, than to work" as can be seen in the "welfare cliff" charts below (source).

Alas, that is the real reason why the labor force collapse continues and will continue even as America enters its next recession. Or depression.

So what happens when one renormalizes the unemployment rate calculation and uses a 30 year average labor force participation rate as a constant instead of a variable to be plugged by the BLS to goalseek a desired result? This happens:


What the chart above shows is that the "real" unemployment rate in October 2009 was 11.2%. Where is it now? 11.1%.

And there is your "Obama Recovery", when stripped of all the fancy veneer and TOTUSed propaganda, right there.

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kchrisc's picture

The Winston Smith recovery.

macholatte's picture


Change you can believe in. Fundamentally transforming America.


Hell is empty and all the devils are here.

William Shakespeare

Boris Alatovkrap's picture

Boris is frequent read "seasonally adjust" for mitigation of disastrous economic data. What is spice and herb for to do with bad economic data? Of course, elitist economist is always perpetual surprise, so maybe is only epicurean pallet for bland food?

Indian_Goldsmith's picture

Excellent comparisons, Tylers. This sort of articles is why i come to zerohedge, instead of those shitty titty click-baity websites like Business Insider, CNBC, Marketwatch.

Besides the illuminating comments, of course.

Dont lower your standards boys!! Kudos!

HobbyFarmer's picture

Thanks Tylers.  Now back to work to the rest of you!  We all have people to support.

TruthInSunshine's picture

U6 is probably close to 18% right now.

Additionally, what needs to be emphasized is that it isn't just the (lack of) quantity of jobs gained, but the (lacking) quality of the jobs gained, in the last 5 years, where low wage (especially CPI adjusted), low benefit jobs have comprised te majority of employment "gains."

And the real kicker, which this essay does a good job of illustrating, is the collapse that has taken place in the labor force participation rate, which is just another tragedy of a faux-recovery built on reflation of asset classes due to idiotic fractional fiat reserve monetary policy, all covered up by a duplicitous press corps.

Doña K's picture

Statistics and lies.

The Green Bay Packers have 100% winning record when playing on a Thursday and it was either snowing or raining.

That's because they only played once under these conditions and they won. 

Xibalba's picture

I hate purity. Hate goodness. I don't want virtue to exist anywhere. I want everyone corrupt.

OC Sure's picture

This is a good article. The LPR is the effect and not the cause. The cause is despotism: "I hate purity. Hate goodness. I don't want virtue to exist anywhere. I want everyone corrupt," said all despotic soulmates. Don't forget, the primary tool of modern despots is the printing press. The Fed is the head; wrestling tenacles will not do.

And here we are as Ben Franklin said was inevitable:

" ...there is no form of Government but what may be a blessing to the people if well administered, and believe farther that this is likely to be well administered for a course of years, and can only end in Despotism, as other forms have done before it, when the people shall become so corrupted as to need despotic Government, being incapable of any other." Speech at Constitutional Convention prior to signatures, Ben Franklin, 1787.

The people have become "so corrupted."

Now what?

Spanky's picture

That's the million dollar question.

Either we will define Now what?

Or TPTB will define it.

Not many other options.

boogerbently's picture


Forget Red/Blue.

The FACTS about this administration are OVERWHELMINGLY, UNDENIABLY, STATISTICALLY.......unkind.

But his popularity remains (relatively) undamaged !




JohnnyBriefcase's picture

What if I told you that his popularity numbers were also fake?


Is that really such a stretch when they fudge ALL other numpers?!

derek_vineyard's picture

son applied for moderate level job. was told there several hundred applicants and 100 had serious experience.  many with 10+ years.

so he passed phase one, was moved on to second interview and told he probably was in the top five (and getting a third interview).

for a $20 hour job? that used to hire entry level kids?  So in the meantime, just get free OBama shit???  (made in china shit???)

what recovery?  fuck you OBama, Bonher, Pelosi, Berquackee, Jamie, Blythe etc. This is the stuff revolutions are made of and

revenge is a bitch. 

Did you know ANY congresman with 2 years served (served??) gets $150,000/year and free medical/dental care for life????  How do i 

join this club? 

piker's picture

How would they really compile popularity numbers? Has anyone here ever been asked their opinion? I know I haven't!

Soul Glow's picture

This is about them and us.  They are 300 families (or so).  We are of 300 million (or stronger).

Who is the underdog?

Jack Napier's picture

Whoever doesn't have the bigger guns, drones, biological cocktails, photonic microprocessors, nanotechnology, RoboCop, and soundwave weaponry.

Soul Glow's picture

They can only use that technology in cities; and where is the mass of educated people?

I mean really educated.  Not Harvard business degrees but real human prowess.

I don't need to run to Chicago to protest - I'll just put my wealth in silver coins, while they're cheap, anyways.

Vampyroteuthis infernalis's picture

They lie with the employment statistics to reduce the perceived workforce. The number is working against them now in case of QE. How will they distort the truth now?

Soul Glow's picture

They will let the currency continue to inflate.  And it isn't that they have a choice - it is inevitable.

eatthebanksters's picture

They plotted the unemployment curve for the next 7 years back in 09'...they can tell you right now where unemployment is going to be anytime over the next three years.  BWAAAHHAHHHAAHHHHAAAAHHAAHHAHAHAHA!

Last of the Middle Class's picture

They'll lie their asses off about QE. Why wouldn't they?

OC Sure's picture

@ Spanky, Re: now what?

Maybe it has been defined:

Amendment I
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.

"The history of the present [politcal elite class] is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute tyranny over these states. To prove this, let facts be submitted to a candid world."

[List grievances here]

Link the petition to the manifesto of this site and have the 10s of thousands of readers sign it?

Spanky's picture
Interesting idea… How about this OC Sure, next election walk into the voting booth and write "No Consent" on your ballot. Big bold letters. Tender it and walk out... Better than voting for Tweedle-Dum or Tweedle-Dee from the red & blue party. If enough folks do it, might just mean something...
-.-'s picture

First, here is what a normal recovery looks like: during the Reagan Years, the Civilian, Non-institutional population - or the total number of Americans eligible for work whether they are part of the labor force or not - increased by 7.4 million, while the labor force increased by 6.7 million - as close to a linear relationship as possible, and also a correlation which any rational person would expect.

So how about the Obama recovery: well, we find that between October 2009 and January 2014, the civilian, non-institutional population rose by 10.4 million, to be expected considering the far greater general population of the US - it is also a number which, on average, increases by about 230K or so every month. So what about the labor force? It is here that things get zany (as we predicted they would many years ago), because it is here that the Obama Recovery has somehow only managed to add a paltry 1.7 million people to the workforce: from 153.8 million to 155.5 million!



-.-'s picture

I was very fotunate during my undergraduate studies in Austin, Texas to have a professor (English, by birth) who routinely expounded upon the falsehood of macrostatistics in the United States (and England) and, moreover, since I was also a mathematics student, he would speak to me about the ostensibility of statisics insofar that the govenment published and presented them to the proprietors of the public's papers.

Oh man, I can even recall how students (a good majority were the (un)fortunate scions of powerful international business moguls or politicians, but some were everyday do-gooder's paying for educaiton with debt whom just wanted to not hear something antithetical to their American Dream) would openly argue with the Liverpool professor, or, in other cases, which were the majority of American students in my class(es), they would say nothing, pack up their notebooks or laptops, and walk away.

It bothers me greatly (and it did then, too, but I hadn't the experience to grapple with the fight between my logical mind and my heart at that time) that Higher Education fosters the psychologies of Weakness, Apathy, Cupidity, Dependency, and Pretentiousness amongst both its faculty and student consituents. To stand out to or against such a riptide of a cultural current is to expect that your stance is to be deemed Failed, Intolerable, Conspiratorial, Distracting, Deviant, and, with respect to loans, a Poor Investment Vehicle. It is funny to think of this expensive, pedagogical undertaking--college--as something of Hayek's malinvestment.

But, hey, why bother lamenting or bitching about it all, right? Professors have to compete to be tenured, paid, and retired comfortably--right? Students have got to, well, your public school teacher and parents and guidance counselor said it: You just should do it or you are going to have to figure it out on your own in a world of uncertainty, assymmetry of arguably all information, and, to top it off, your family will be dissappointed with your decision. And hell, if you are going to be inheriting anything in excess of, say, ten thousand dollars, you might just be stuck doing what is told to be in line.

I suppose that some meaning behind that can be found in in Robert Zimmerman's own words: There is nothing more helpless than a rich man's son.


Oh, and fuck Mr. Zimmerman too, I'll say that---he had some good chances, but he, like many a musician, artist, poet, painter, and producer became no more than images of a greater spectacle: a God damned Commercial, Mr. Dylan, and I'll say that on my own two feet looking at you squarely in the eyes. And it does pain me to know this! that I have to say that about your career in order to be as true to myself and others as the once-were-words that are in this song of yours. And this includes many other prominent figures too, so it ain't just all you Bob. I just hurt to say it to you because I was greatly helped during foster care having had listened to you on headphones in homes and places that were not mine for years. But, when I left foster care, I begin to see how you had also left a place in your past for a more comfortable future. Think about your own Song to Woody---of the hearts and the hands of the men who came with the dust and are gone in the wind. Ironically enough, death, itself, has been the grace to save many people from commericalism in your field of work. I don't even have to list those musicians who have died...



Break Yo' Self Bitch...

Cheers, to the Club, the Fight, to You All...

Professorlocknload's picture

-.- ,  "You just should do it or you are going to have to figure it out on your own in a world of uncertainty,"


I didn't do it, and I believe I have figured it out, at least those things necessary for survival, in a world made mad by it's institutions. And I looked at every damned hard knock along the way as prepaid tuition.  

All free and clear now. Finally able to take time to see it all unfold as it is, one big deception. It's the Zen in it that keeps me interested now.

Thanks for the "crux."

Atlas_shrugging's picture

In addition to the work-disincentives from the increasing welfare state, the other big issue is ZIRP's effects on older workers.  They aren't going to retire.  Ever.  Check your local law firm and count up all the 60-70yr old partners still kicking back and earning.  Why stop and open spots for younger lawyers (who needs them anyway but that's besides the point)?  If their retirement nest egg yields zero (or negative real), why try and live off of that?  A massive job killer for the next generation coming out of college.

batterycharged's picture

Have any of you folks ever tried to apply for welfare?

Yeah, unemployment is high because of "the welfare state".


Fucking idiots. Hey, try and get some welfare then get back to me.


Has it ever dawned on you that there may be no jobs? Possibly?

There is no welfare state. There is no extended welfare, most states are pulling back on welfare and food stamps.

Get a FUCKING clue you FUCKING MORONS!!!!! There is NO WELFARE STATE unless you happen to be on WALL STREET SUCKING FROM THE FED TEET getting money from carry trades or getting a bank bailout.

YOu stupid fucking people make me nauseated.


macbone's picture

Here let me help you buckeroo. I live in Wash. Heights, NYC which is the second largest city in the Dominican Republic. For 12 years I have witnessed that at least 4 out of every 5 people in front of me on line in the grocery store uses the wic benefits card. In the warmer months there are booths on every major corner (one intersection, four corners = four booths) competing to sign up as many people as possible to every form of social welfare that the liberals have ever come up with. (The free phones are especially popular.)

So my advice to you dear batteryguy, is that the next time you go into the welfare office to try get some of the free shit bennys that suckers like me wind up paying for, you go in limping, put on a Spanish accent, and if you are too fair complected, try frizzing your hair out a bit and tell them that you are one of those black albino guys and that you suffer discrimination from all sides of the racial spectrum, They love shit like that. You'll get your Benny's in a couple of weeks, unless Obama gives you a job in his cabinet. If that doesn't work you can always put on a dress and wig and tell them you are aids infected tranny hooker. Best of luck and don't be afraid to throw a bitchfit. You seem pretty good at it already.

Sincerely, Francis Sawyers Lonely Ghost

Professorlocknload's picture

Succinct, mac.

I'll just leave it there, 'till the hackles settle down.



Johnny Cocknballs's picture

I hear you on the Wall Street stuff, and at least a minority of posters here have also agreed that the racially-tinged opprobrium against welfare moms is a fantastic distraction for the theft, by orders of magnitude greater, committed by the megabanks in collusion with the megabank owned FRS.

But there is very much a welfare state - federally and at the local level.  And there are millions receiving public benefits from more than one program.  Not long ago I had to work on something that involved a woman who was on welfare and had been for more than 5 years, got a housing subsidy, SSDI for one kid, WIC benefits and other assistance like food stamps for all of her 5 kids {5 fathers}.  Sure, that's just anecdotal, but you can multiply it by several million across the country. 

I'm not against safety nets in some form, but it is axiomatic that they can serve as a disincentive to find work.

I've also been a registered rep for someone who claimed SSDI benefits, got them after an appeal, and used the lump sum for back benefits to pay off a new {2 year old} car.  I absolutely know this person had a work capacity - maybe not a 60 hour a week high stress gig, but something.  Instead, she has been able to maintain a lifestyle of driving around, smoking cigarettes, and visiting a handful of different doctors for, I wouldn't doubt, a handful of different scripts for oft-abused medications.

The "gap" that doesn't cover junk food, movies, and new clothes is going on credit cards which, I suspect, will eventually be discharged in bankruptcy because, hey, this person is unable to work!


Another example I've seen first hand is workers' comp programs...  only an idiot would oppose those programs, but from what I saw, there was a good amount of abuse, and it increased the further out from injury you went.  People get used to not working and find ways to sustain subjective complaints.  It is very hard to get those people off benefits, even when they clearly have a work capacity, and even when, for example, they would have almost certainly retired within the initial payment period anyway.


And all of us are paying for it.

Whatever my sympathies are for people who fall on hard times, and differences with orthodox libertarians about providing temporary safety nets, I have seen myself how such programs can foster dependency.  These programs cost in the tens of billions, and I'm not counting medicaid/medicare abuse, overmedication and overutilization. I also worked my ass off, for years, essentially doing nothing but working and studying 7 days a week, and when I started making some money, yeah, I kinda resented the immense amount of money, given my loans, the government suddenly took out of my paycheck.  I don't remember Uncle Sam bringing me coffee or doing my fuckin' laundry for me all those years.  So when he pisses it away on deadbeats, yeah, I find it to be stealing from me.


It's valid to say we should keep our eye on the Great Thieves before worrying about the petty ones, but if you're going to insult the intelligence of this crowd while distributing inanities, you might be happier over at Daily Kos.  They never give anyone credit for hard work there, either.


DaveyJones's picture

it's hard to believe government payout systems are corrupt

just more math to bring this place down faster


cherokeepilot's picture

Very well stated response to what was, most likely, a statement by one of the recipients of the monies given to the members of the FSA.  Thank you.

JoBob's picture

@batterycharged:  "...unless you happen to be on WALL STREET SUCKING FROM THE FED TEET ...

YOu stupid fucking people make me nauseated."


Please tell us stupid people what a "TEET" is and where on one's anatomy it might be found.

-.-'s picture

Fucking idiots. Hey, try and get some welfare then get back to me


This...where to start? A suffering individual unable to process primarily two things concurrently: logic (his/her public education (like mine) did not afford for this study, nor history, etc.) and his/her emotions (his peers, parents, and further forefathers come from this same continuation of a culture that created the hitherto welfare system). He/She is claiming no jobs: I wonder if he has even tried, and I mean really tried (I just finished 6-months working under a Korean butcher making raw dog food with my begloved hands and, now, you guessed it, his wife has stage four cancer and he has apologized to me for having to leave me behind in Texas while he dutifully moves the operation to ME in order for his ailing wife to live near family---now I'm unemployed, but I am awaiting an interview with a local liquor store for a full-time retail position). 

You scared human being---life is an action not an answer...

Wait What's picture

"Statistics and lies"

100% of states that legalized recreational use of marijuana housed a team that went to the super bowl the following season.

that's all the incetive most americans need to get on the weed wagon!

DaveyJones's picture

both teams knew how to take a hit

Wait What's picture

U-6 is the 1st thing that came to mind as I read the comparisons. so I went over to FRED and it turns out, surprise, surprise, the data set only goes back to the mid-nineties. Around the time CPI went hedonic.

Govt officials have known we were on this deteriorating trajectory for a long time. Not until wage arbitrage completely disappears, and the average US standard of living is comparable to 2nd/3rd world, will people realize this was the game all along. most people don't know economics and its 'we are making america competitive again' philosophy. translation: weak currency, low wages, export oriented.

next time POTUS says "making america competitive" remember this is what he means.

ironically, the same people who he was basically telling 'your standard of living is going to deteriorate from here on out' voted for him... twice.

Rafferty's picture

Serious question:  Why would 'they' want to make America weak?

Wait What's picture

the logic comes from positive economics, not really thought of in terms of  'weak' or 'strong'. it's a question of efficiency. cut the fat off the wages and cost of doing business in the US and america becomes 'competitive'. that it causes a deterioration in standard of living is a by-product. a very real one. but that's what happens when you put wanna-be-engineers in charge of what real engineers would tell you is not an engineering problem.

nmewn's picture

An old engineering joke, I'll breviate it.

A retired engineer was called in after many wannabe engineers could not find the problem that had shut down production in a multi billion dollar enterprise. The retired engineer came in and studied the situation for a day and at the end of the day, produced a piece of chalk and marked the faulty component with an X. The component was replaced and the multi billion dollar enterprise was up & running again.

A month later a flustered CFO walked into the CEO's office and delivered an invoice for services rendered, it read simply: "One day = $500.00. Chalk = $500,000."

The CEO went ballistic (of course?) and called up the retired engineer. "WTF is this invoice about?!?!" he screamed into the phone. The engineer replied, the $500.00 is the cost of me being there, the $500,000 chalk is the cost of me putting the X exactly where it needed to go.

The invoice was paid in full ;-)

Artifice's picture

This was based on a true story, though the names escape me - something to do with the early days of General Electric. You know the gist but I'll summarise :


One of the transformers they were using was producing excess noise and operating below spec. They called in a specialist, (insert name here). He only asked for a chair, which was provided. He sat in the chair next to the transformer for a while before moving it to a different position, sat a while longer, moved again, etc. He was there for the better part of a day, then returned to the plant manager and indicated a specific coil to be replaced. The part was replaced and the transformer worked perfectly. Later, the manager received a bill for (again, lost but maybe/assuming $2,000) - It was invoiced as such :


Chalk : $1.00

Knowing where to put it : $1999.00


The bill was, as per the joke, paid. I wish I could find a reference for this, it's pure gold. Truth can be stranger than fiction :)

New_Meat's picture

I've heard it as a generator stator at GE Schenectady.

DaveyJones's picture

I heard kind of a reverse of that story recently. And it's true. (I apologize for its Seattleness). A computer systems guy I know was buying a Starbucks and he watched the people paying with the new tricks on their cellphone. He got curious and then noticed something and wrote an email to one of their systems person telling them it had a serious vulnerability. THey of course told him he's an idiot and to screw off. About two weeks later he got a phone call and it was their head system guy kissing his ass and saying other things men don't normally say to each other. They now put 1000 credit on his cell phone every month. I told him it was a neat story but asked him why he wasn't reacting like Kramer in that Seinfeld episode     

Johnny Cocknballs's picture

global currency/monetary authority.

But, I think it's more bout wealth extraction

Greed is good, until you're a victim of it.