Employment Loss During Great Depression May Be 4.3 Million too High

Lebergott (blue)     Constructed (Purple)

From the Richmond Fed Study:

Between 1929 and 1933, the unemployment rate rises from 5.9 percent to 19.2 percent, versus 3.2 percent to 25.2 percent in Lebergott. Between 1939 and 1943, the rate declines from 15.2 percent to 6.4 percent, compared to 17.2 percent to 1.9 percent. Abstracting from the Great Depression period and World War II, Lecznar and Sarte’s counterfactual historical unemployment rate appears more consistent with post-war CPS data with respect to volatility or amplitude. Movements in employment also are more subdued than in Lebergott. The employment series implied by the constructed pre-war employment rate suggests that Lebergott’s series overstates the decline in employment between 1929 and 1933 by about 4.3 million workers, and overstates the increase in employment between 1934 and 1943 by about 4.6 million workers.

Read the entire study. The disclaimer for the study:

Views expressed in this article are those of the authors and not necessarily those of the Federal Reserve Bank of Richmond or the Federal Reserve System.