(Very) short reading list: unemployment in the 1930s.

October 10, 2008, 2:39 pm

This is a lesson in reading the notes.

Begin with

Carter, Susan B. , “Labor force, employment, and unemployment: 1890–1990.” Table Ba470-477 in Historical Statistics of the United States, Earliest Times to the Present: Millennial Edition, edited by Susan B. Carter, Scott Sigmund Gartner, Michael R. Haines, Alan L. Olmstead, Richard Sutch, and Gavin Wright. New York: Cambridge University Press, 2006.

Read the footnotes! Then have a look at

Weir, David R. “A Century of U.S. Unemployment, 1890-1990: Revised Estimates and Evidence for Stabilization.” Research in Economic History 14 (1992): 301-346.

And, well, you could stop right there, but that would be missing the fun. But inasmuch as neither of these sources is easy to get hold of, let me explain why this is such a fun topic.

Used to be, the unemployment series for the 1930s looked like this:

This is from a series constructed by the distinguished economist Stanley Lebergott in 1964.1

And wow, that looks bad, doesn’t it? The recession of 1937-38 almost completely wipes out any gains of the previous few years. It’s almost as if the New Deal didn’t do anything for anyone, much.

A lot of people looked at these numbers without reading the notes on how they were constructed and concluded just that.

Then in 1976, an economist named Michael R. Darby wrote an article with the delightfully self-explanatory title, “Three-and-a-Half Million U.S. Employees Have Been Mislaid.”2 What Darby did, you see, was read the notes. Here’s what Lebergott had to say about counting unemployment in the 1930s:

These estimates for the years prior to 1940 are intended to measure the number of persons who are totally unemployed, having no work at all. For the 1930′s this concept, however, does include one large group of persons who had both work and income from work—those on emergency work. In the United States we are concerned with measuring lack of regular work and do not minimize the total by excluding persons with made work or emergency jobs. This contrasts sharply, for example, with the German practice during the 1930′s when persons in the labor-force camps were classed as employed, and Soviet practice which includes employment in labor camps, if it includes it at all, as employment.3

Did you catch that? People who painted murals for the WPA fall into the same category as internees in Mauthausen or the gulag. So they count as unemployed!

One could say a few things about that.

(1) Wow, that’s a lot of ideology to cram into a single data series;
(2) if you’re using the unemployment data to answer the question, “did the New Deal help people,” then this data set is going to give you the wrong answer, because it’s going to show people suffering unemployment who in real life had a job, as Lebergott says;
(3) but what if people in emergency work acted like the unemployed—i.e., they were looking for a job and
(4) what about the “real” economy—the private industrial economy—how did it do?

Now, as it happens it looks like the answer to (3) is, mainly they didn’t—people who had an emergency job acted like they had a job (perhaps because they had a job) and probably shouldn’t count as unemployed.4

And if you don’t count these people who held jobs as unemployed, you get a different picture of unemployment in the 1930s. Below, a graph showing the same series as the above, then a new series—from Weir’s table D3, which also appears in Historical Statistics of the United States—that counts only people without jobs as unemployed.

Now, if you look at that, you might think wow, the Depression was really bad, but the New Deal really helped.

Weir also said, if you’re worried about item (4)—if you want to look only at the “real” economy, i.e., private nonfarm jobs—I’ll make it possible for you to do that too, constructing a series of private nonfarm unemployment and leaving the government out of it entirely. If we add that to our graph, we get this:

So again, here, we see significant improvement under the New Deal.

Now, if faced with these alternatives, you chose data based on Lebergott’s assumptions, you would be presenting the data that showed the New Deal in the worst possible light, wouldn’t you.

1Stanley Lebergott, Manpower in Economic Growth: The American Record since 1800 (New York: McGraw-Hill, 1964), table A-3.
2Michael R. Darby, “Three-and-a-Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment, 1934-1941,” Journal of Political Economy 84, no. 1 (February 1976): 1-16.
3Cited in Darby, 3; Lebergott, 184-5.
4Robert A. Margo, “The Microeconomics of Depression Unemployment,” NBER Working Paper no. 18, December 1990.

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