It Will Take At Least 6 More Years To Get Unemployment To 6.5%


Remember when George W. Bush was President and the media considered an unemployment rate over 5% to be sign of a terrible economy? Well according to two new analysis of our current economy, it may take at least six more years for the nation to get to 6.5% unemployment.

The most important part of the Federal Reserve-watching game is now this: figuring out how long it will take for the unemployment rate to drop to 6.5 percent. That’s the benchmark that the Fed’s rate-setting Open Market Committee pegged in December as the one that will prompt it to begin raising the Fed funds rate, now set between 0 and a quarter of a percentage point.

Two new pieces of research — one from Morgan Stanley, one from CNBC — suggest it could be years, in fact, at least a half a decade, before the economy hits that mark.

This chart, comparing the “great recession” to other recent recessions shows just how protracted this economic malaise has been, and likely will be:


It’s interesting to note that these previous recessions were largely brought on by tax increases, and government growth, and stopped by spending reforms and tax cuts. Unlike this recession where we’ve reacted by an aggressive round of stimulus spending, and big new taxes/regulations on employers including a health care law that imposes huge costs on employees working more than 30 hours a week (among other absurd regulations).