Three-And-A-Half Million U.S. Employees Have Been Mislaid: Or, An Explanation of Unemployment, 1934-1941
A major conceptual error in the standard BLS and Lebergott unemployment estimates for 1933-1943 is reported. Emergency workers (employees of federal contracyclical programs such as WPA) were counted as unemployed on a normal-jobs-to-be-created instead of job-seekers unemployment definition. For 1934-1941, the corrected unemployment levels are reduced by two to three-and-a half million people and the rates by 4 to 7 percentage points. The corrected data show strong movement toward the natural unemployment rate after 1933 and are very well explained by an anticipations-search model using annual full-time earnings.
The author hopes that Bob Gordon will forgive the obvious recycling of his original (1969) title and that this recycling does not seriously reduce the total stock of titles (see Darby, 1973). Perceptive questioning by James C. Lothian and comments by Anna Schwartz wrested the admission that my theoretical framework could not explain the high unemployment rates of 1934 through 1941 unless millions of people were gainfully employed as "unemployed." Thinking of generous unemployment insurance, I had no idea that my hyperbole would prove literally correct. Mrs. Schwartz's incomparable knowledge of data resources provided the key references. The regression was run on the NBER's Troll system by Nurhan Helvacian.
Darby, Michael R. "Three-And-A-Half Million U.S. Employees Have Been Mislaid: Or, An Explanation of Unemployment, 1934-1941." Journal of Political Economy, Vol. 84, No. 1, (February 1976), pp. 1-16. citation courtesy of