Why Unemployment Rose So Much, Is Falling So Fast: Alan Krueger

Few things are more puzzling and disconcerting for an economist, and much of the American public, right now than the unemployment rate.

From late 2008 to the end of 2009, the U.S. unemployment rate jumped by 3.1 percentage points. What was so shocking about this was that the relationship between unemployment and the drop in the gross domestic product during the recession would have predicted only a 1.2 percentage point increase. This was the largest forecasting error in decades.