Unemployment in Recessions

Report Outline
Mounting Concern Over Unemployment
Recurrent Joblessness and Federal Action
Outlook for Achieving Full Employment
Special Focus

Mounting Concern Over Unemployment

Shift in Nixon ‘Game Plan’ to Job Problems

Unemployment overtook inflation as the most serious domestic issue facing the Nixon administration as 1970 drew to a close. Economic observers noted a basic shift in policy in a speech the President delivered to the National Association of Manufacturers in New York on Dec. 4. While not abandoning the battle against inflation, Nixon's emphasis was on measures to stimulate the economy enough to roll back unemployment—then standing at the highest level in more than seven years. During November, 4.8 million Americans were out of work, about two million more than a year earlier. One worker in 17 was out of a job, compared with one in 30 when Nixon came into office in 1969.

Furthermore, the quality of unemployment in 1970 was disturbingly different from that experienced in four previous recessions since World War II. For the first time, large numbers of white-collar workers, highly skilled technicians, and even managers and scientists were being thrown out of work. And despite month-over-month increases in the unemployment rate, inflation was persisting. Arthur F. Burns, chairman of the Federal Reserve Board, raised the question in a speech at Pepper-dine College in Los Angeles on the same night Nixon was speaking in New York. Burns said it was important for the country to understand that “we are dealing, practically speaking, with a new problem—namely, persistent inflation in the face of substantial unemployment—and that the classical remedies may not work well enough.”

As most analysts saw it, the rising tide of joblessness had forced a change in Nixon's “game plan” for the economy. This term, appropriated from football, was used to describe a classical program of economic restraint involving (1) stringent control over expenditures, (2) maintenance of tax revenues and (3) a restrictive monetary policy. These actions, taken at the outset of Nixon's administration, were designed to moderate the rise in prices and permit the return to a more stable rate of growth by mid-1972.