Some economists have labeled the first 10 years of America’s millennium the “lost decade”–at least from a financial point of view. The label stems from Japan’s woes in the 1990s when unemployment was high and economic growth contracted following an extended bubble period of high land values, low interest rates, and market liquidity. Sound familiar?
Japan’s growth has been so sluggish following that lost decade that it is still not considered fully recovered today–20 years later. In perhaps a stark contrast between the two nations’ cultural differences, our recent presidential election campaigns served to ignite America’s impatience for a more expedient recovery.
Yet when you look at unemployment in this country, every decade since the 1970s has seen a year or two when the average annual unemployment rate was over 7.0 percent. In 1976, our nation’s average unemployment was at 7.7 percent, dropping to 7.1 and 6.1 percent over the next two years. From 1980 to 1985, during the first term of the Reagan administration, unemployment ranged from 7 percent to as high as 9.7 percent. In 1992, unemployment went up to 7.5 percent. Once we reached the millennium, unemployment rates stayed at or below 6 percent until 2009. From 2009 to 2011 the average annual unemployment rates were 9.3, 9.6 and 8.9 percent. This year’s rate looks like it will end lower.
Anybody you ask will give you their unique perspective on why unemployment levels of late have remained high. But it does seem that unemployment rates go through inherent cycles over time just like inflation, GDP, interest rates, stock market performance and other economic factors.
Note that there’s nothing but a casual historical analysis of unemployment rates and a healthy dose of optimism to support this hypothesis, but perhaps we’ve met our quota for greater than 7 percent unemployment already for both the first and second decades of the millennium, and are due for lower levels until the 2020s.
They say you can’t control what happens to you, but you can control the way you respond. Because the Japanese culture emphasizes frugality and saving, the impact of its “lost decade” on the average Japanese family was minimized. Perhaps, moving forward, we can each devise a plan to better insulate our finances from circumstances we cannot control, and pay a little more attention to the inherent economic, market, and unemployment cycles that have affected us, and will continue to in the future.
If you’d like to discuss ways to implement such a plan, please give us a call.
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