Not even the gloomiest predict that today’s slump will approach the severity of the Depression, which shrank America’s economy by more than a quarter, and put a quarter of the working-age population out of a job. But with
the world in its deepest recession since the 1930s and global trade shrinking at its fastest pace in 80 years, the misery of mass unemployment looms nonetheless, and raises the big question posed in the Depression: what
should governments do?
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In the rich world the job losses are starkest in America, where the recession began. Its flexible labour market has shed 4.4m jobs since the downturn began in December 2007, including more than 600,000 in each of the past
three months. The unemployment rate jumped to 8.1% in February, the highest in a quarter-century. An American who loses his job today has less of a chance of finding another one than at any time since records began half a
century ago. That is especially worrying when the finances of many households have come to depend on two full incomes.
But it is already clear that unemployment will strike hard far beyond America and Britain. In Japan output is plunging faster than in other rich economies. Although unemployment is low, rapid job losses among Japan’s army
of temporary workers are exposing the unfairness of a two-tier labour market and straining an egalitarian society.