The unemployment rate dipped downward again in January to 4.3 percent and the unemployment level down to 7.36 million, according to the latest data from the U.S. Bureau of Labor Statistics. That’s the second month in a row, when the most recent peak was in November 2025 at 4.5 percent or 7.78 million after rising from its prior low of 3.4 percent in April 2023.
The unemployment level had been rising for about 37 months from Sept. 2022 to last November, with the record in modern history being 39 months from a low of unemployment to a high of unemployment from March 1989 to June 1992 when it rose 3.8 million to 10 million.
It’s too early to tell, but the unemployment seen last November might have been the worst of it for this cycle. At just 4.5 percent, then, if the high post-Covid inflation caused a recession, it was the lowest peak unemployment rate on record. If anything, there was room for further upticks in unemployment, which might have had the impact of lessening demand temporarily and helping inflation to cool some more while yielding more room for interest rate cuts.
But now unemployment is dropping again and employment hit a brand-new record of 164.5 million, a gain of 528,000 in January alone. Is that peak employment? Will it soften again in February? That’s the fun part, where you have to nervously wait around for the new trend to emerge, if any.
On one side, 37 months is a long time for unemployment to rise, and on other is, so what, new records are set all the time. Anything can happen!
President Donald Trump and Treasury Secretary Scott Bessent are promising (hoping) this will be a disinflationary boom akin to the 1960s, 1980s, 1990s and 2010s. It’s happened before, and they think with the One Big Beautiful Bill Act, the President’s tariffs, higher wages — average weekly earnings have grown 4.3 percent from a year ago — the AI production gains and the real post-inflationary GDP boom, it can happen again.
Alternatively, the President’s critics say instead inflation will rise rapidly, leading to the next bust. So, who’s right?
The thing that was constant in all of the prior disinflationary booms was a steady, clockwork-like decrease in the unemployment rate over longer periods of time amid cooling or cooler inflation compared to the prior cycle.
Here are all the periods of falling unemployment in the postwar period, including the booms and busts.
In October 1949, the unemployment rate peaked at 7.9 percent and kept falling until May 1953 at 2.5 percent, a 43-month stretch, but inflation only stayed below 2 percent for 9 months during that time, and soon the next recession was upon the economy.
The next peak in unemployment rate came in September 1954 at 6.1 percent and kept falling until March 1957 at 3.7 percent, 30-month stretch. That time, inflation stayed below 2 percent for 24 months before the economy overheated into the next recession.
Then, the unemployment rate peaked in July 1958 at 7.4 percent and would fall for 19 months until February 1960 at 4.8 percent. But, inflation stayed below 2 percent the entire period even as the economy fell into recession.
That would come into play as the next peak unemployment rate was in May 1961 at 7.1 percent, which would keep falling until May 1969 at 3.4 percent — a 96-month stretch. When you combine the prior period with this one, there was 87 months combined where inflation was below 2 percent.
From there it got really bumpy. Next up, the unemployment rate peaked at 6.1 percent in August 1971 and would fall until October 1973 at 4.6 percent, just a 26-month stretch and only 17 months where inflation stayed below 4 percent in a worrying sign as the economy overheated more rapidly into the next recession.
In May 1975, the unemployment rate would peak at 9 percent and keep falling until July 1979 at 5.7 percent, a 50-month stretch, but only 8 months where inflation was even below 6 percent. Just awful, and so the next recession was incoming.
In July 1980, the unemployment rate peaked at 7.8 percent and fell until July 1981 at 7.2 percent, just a 12-month stretch, and only 3 months where inflation was below 7 percent. More pain, and the next recession came even faster.
In December 1982, the unemployment rate peaked at 10.8 percent and fell all the way until March 1989 at 5 percent, a 75-month stretch, coinciding with 77 months when inflation was below 5 percent (still a little high but much-felt relief for the American people compared to the 1970s). But nothing lasts forever and so the next recession would eventually come.
In June 1992, the unemployment rate peaked at 7.8 percent and would keep falling all the way until April 2000 at 3.8 percent, a very long 94-month boom, with 80 months where inflation was about 3 percent or less. Another one where nothing lasts forever, and so the next recession would come.
By June 2003, the unemployment rate peaked at 6.3 percent and keep falling until May 2007 at 4.4 percent, a 47-month stretch that lasted until the financial crisis of 2007 and 2008.
By October 2009, the unemployment rate had peaked at 10 percent and would keep falling until February 2020 at 3.5 percent across the Obama and Trump administrations, a record 124 months, including 137 months where inflation was lower than 4 percent, another very nice boom, all leading to the unexpected Covid recession of 2020.
By April 2020, the unemployment rate had peaked at 14.8 percent and would keep falling until April 2023 at 3.4 percent, and just 11 months with inflation below 3 percent before skyrocketing in 2021 and 2022.
All told, these periods of falling unemployment averaged 54 months, and the disinflationary periods articulated above lasting on average 46 months. Both breaking those up, the four disinflationary booms above averaged job growth for 97 months and disinflation for 95 months. As for the shorter boom-to-busts, job growth lasted about 33 months and disinflation just 18 months.
The lesson appears to be in favor of price stability leading to the virtuous cycle of slowing inflation and sustained job growth. Now with job growth appearing to resume, the question will be how long the disinflation can be maintained. Obviously, the longer the better.
President Trump is optimistically projecting lower inflation growth of the 1960s, 1980s, 1990s and 2010s. Of course, that’s what every president wants. Sometimes it works out, about 33 percent of the time, but usually it doesn’t. As usual, stay tuned.
Robert Romano is the Executive Director at Americans for Limited Government Foundation.
