This is in response to a reader's request for a long-term look at the unemployment rate and recessions. I think that no matter how you slice it, the recovery (in terms of jobs and the unemployment rate) has been slower this time around than following any other recession. This has been a deep recession (people are now referring to it as "The Great Recession") and a painfully slow recovery. Calculated Risk has a nice chart which makes the point clearly:
See also Mark Perry's post on the subject of recessions and recoveries.
The reality is that a full recovery in US employment is unlikely before 2022 or after -- more at:
ReplyDeletehttp://wjmc.blogspot.com/2011/01/us-jobs-recovery-could-take-decade.html
Those Americans who have been unemployed for longer than 18-24 months will likely never work again in the US -- emigration to foreign countries with their families to find work may be required in order to survive -- I read somewhere that some conservatives believe that a mass exodus of unskilled and unemployed labor from America is the only way the US economy can truly recover -- ironically, there is some truth in their views. Clearly, US fiscal and monetary policy-makers have proved willing and able to throw Main Street America under the bus in order to save Federalism from itself.
Does this analysis change your predictions for GDP growth and stock market returns for 2011?
ReplyDeleteNo. I've been saying ever since early 2009 that this would be a sub-par recovery. The biggest drag on growth has been government "stimulus" spending, since it has sucked the lifeblood out of the economy, spending money on make-work projects, transfer payments, etc. All very inefficient. No recognition that growth must come from the private sector. I still think we're in a slow recovery. The stock market has been rallying because expectations were much less optimistic than mine. In early 2009, markets expected a depression; instead we have a modest recovery. That's a big difference. Markets are still very pessimistic however, so I see room for more upside.
ReplyDeleteScott, job recovery was weak coming out of the 2001 recession; it is much slower this time. It was also slower in 1991 but not as much as the most recent two.
ReplyDeleteDo you think the change from an industrial/manufacturing weighed economy to a service one has had an impact on employment coming out of a recession? I'm not trying to excuse bad policy, I'm wondering if slow employment growth is now a norm in a recovery.
The shift from an industrial/manufacturing economy to a service economy has been going on for at least my entire lifetime, and there is no evidence that it has sped up meaningfully in recent decades. So it's nothing new, and therefore you can't blame it for slow jobs growth in the past decade. Bad monetary and fiscal policy cannot escape bearing the lion's share of the blame.
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