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High unemployment and 1984

The continued rise in unemployment, now close to 11 percent, casts doubt on the projections of the Council of Economic Advisers that the unemployment rate may soon decline but that in five or six years the rate may still be as high as 6 or 7 percent. The unemployment record of the past 25 years casts doubt even on this suggested slow rate of recovery.

For the Reagan administration, the prospect of lingering high unemployment involving around 10 million persons, with proposed employment opportunities in public works involving only about 300,000 jobs, casts a dark Republican shadow on presidential and congressional prospects for 1984.

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The record of unemployment over the past 25 years provides one significant clue as to the probable level of unemployment in 1984. Neither for the country nor for the Reagan administration is it a reassuring clue. It definitely provides no suggestion of a speedy reduction in the number of unemployed to help the 1984 Republicans in their presidential and congressional campaigns. For the country as a whole, the record suggests no more than a possible reduction of the present unemployment rate down to about 9 percent.

The unemployment record of the past quarter century shows that there were reductions in 1958-59, 1961-62, 1971-72, and 1975-76. In the 1958-59 business recovery the unemployment rate was reduced from 7 percent to 5 percent, followed by a return to 7 percent in 1961. It then fell from this 7 percent level to about 51/2 percent in 1962-63. Following the business recovery of 1963-69 the unemployment rate returned to 6 percent in 1971, then fell to about 5 percent in 1973. The latest recovery experience shows unemployment reaching briefly 9 percent in early 1975 and receding to about 7.5 percent in 1976. We are now up to almost 11 percent unemployment.

These historical experiences say in effect that the unemployment rate two years hence could still be at an unusually high rate of 9 percent. No one is now predicting a 1983-84 marked business recovery, since much of the unemployment is centered in areas dominated by the depressed iron and steel industries with dubious recovery prospects. Some reductions in unemployment may be expected from increased government-financed public works. We may see a return to the labor market of some of the million or more workers who have given up and left the labor market in the past year or so. They would be competing with some of the current number of registered unemployed.

Business forecasters who this year had been forecasting the bottom of this recession by the end of this year now see only a slow business recovery starting sometime in 1983. They thus join the Council of Economic Advisers in foreseeing only a slow rate of recovery, with high unemployment continuing for several years.

The prospect of a slow business recovery and a large number of still unemployed in 1984 would obviously be a substantial handicap for those holding office or seeking reelection in the 1984 campaign.