Unemployment in the 1970s

by Russell Huebsch; Updated September 26, 2017
The 1970s had high unemployment during the second half of the decade.

In December 2010, unemployment in the U.S. reached 9.8 percent, according to the Bureau of Labor Statistics (BLS). Although this number is very high compared to historic rates, the U.S. saw similar unemployment during the 1970s. The 1970s, however, saw high unemployment because of a demographic change in the labor force, poor economic policy and several raw materials crises across the globe.

Facts

Unemployment stayed close to its natural rate -- at any time 4 or 5 percent of people are unemployed -- during the first half of the 1970s. After 1974, unemployment averaged 7.9 percent and some years saw the rate reach more than 9 percent, according to the BLS.

Causes

The 1960s in the U.S. were characterized by social upheaval, such as sit-in protests, that led to the Civil Rights Act. This also resulted in equal opportunity in the workplace. A significant portion of the rise in unemployment came from women entering the workforce in larger numbers than in previous decades, according to the Congressional Budget Office. Also, an oil embargo in 1973 by the Organization of the Petroleum Exporting Countries (OPEC) brought on a recession in the U.S. and inflation. In economic theory, inflation should reduce unemployment because it increases the money supply and potential growth. Instead, the U.S. experienced stagflation -- high inflation and unemployment. Uncertainty in prices resulted in employers becoming timid in their hiring practices.

Misconception

Even when unemployment began falling at the end of the decade, the rate varied widely in local areas. In 1979, for example, Menominee County, Wisconsin, saw 40 percent unemployment, while Sioux County, Nebraska, had 1 percent, according to the BLS. This occurs because some areas of the country depend heavily on certain industries. Michigan and Ohio, for instance, were centers of auto production in the 1970s. When a slowdown in the auto industry occurred in the second half of 1979, unemployment in Ohio jumped 3.7 percent within a year.

Theories

Some "bad luck" theorists, such as Athanasios Orphanides, contend that unemployment and inflation during the 1970s were largely due to factors outside of the control of U.S. monetary policy, such as the oil embargo. Other economists, such as Milton Friendman, credit Ronald Reagan with clamping down on inflation by contracting the money supply. This resulted in a recession during 1981 and 1982, but the U.S. could then expand the money supply, grow the money supply and reduce unemployment after a temporary setback.

About the Author

Russell Huebsch has written freelance articles covering a range of topics from basketball to politics in print and online publications. He graduated from Baylor University in 2009 with a Bachelor of Arts degree in political science.

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