Is the current economic slump worse than the recession of the early 1980s?
Measured by unemployment, the answer appears to be no, or at least not yet. The jobless rate was 10.2% in October, compared with a peak of 10.8% in November and December of 1982.
But viewed another way, the current recession looks worse, not better. The unemployment rate among college graduates is higher than during the 1980s recession. Ditto for workers with some college, high-school graduates and high-school dropouts.
So how can the overall unemployment rate be lower today but higher among each group? The anomaly is an example of Simpson’s Paradox — a common but misleading statistical phenomenon rooted in the differing sizes of subgroups. Put simply, Simpson’s Paradox reveals that aggregated data can appear to reverse important trends in the numbers being combined.
The reason the current overall rate looks better: College graduates, who have the lowest unemployment rate, are now more than a third of the work force, compared with roughly 25% in 1983, says the Labor Department. Meanwhile, the share of high-school dropouts has shrunk to roughly 10% of the work force, from nearly 20% in 1983.
That means the paradox will persist until the total current unemployment rate surpasses the high watermark of the early 1980s. Economists don’t expect the November unemployment rate — due out Friday — to reach those heights.
