A Jobless Recovery?

In recent posts I’ve suggested various ways of looking at the national job numbers. In “Unemployment Numbers: The Long View,” I used a simple “back to pre-recession jobs” threshold to compare the 2007 recession and recovery to the trajectories of all other postwar recessions. In “Back to Full Employment” (posted at the Center for Economic and Policy Research Blog), I added three other thresholds or targets: the December 2007 unemployment rate, the December 2007 unemployment and labor force participation rates, and the “full employment” unemployment and labor force participation rates of the late 1990s. In “The Good Jobs Deficit,” I used the Bureau of Labor Statistics occupational projections for 2010-20 to drive home the importance of considering the quality of whatever jobs we might add.

One more run at these numbers is, I think, instructive. At the suggestion of Chris Brenner, I’ve tweaked the graphic comparing all postwar recessions to isolate the recovery phase of each business cycle. The first metric, “since the start of recession,” tracks non-farm jobs by month from the onset of each downturn, until the job numbers return to their pre-recession level. The second metric, “since start of recovery,” tracks non-farm jobs from the trough of each recession for four years (or until the start of the next business cycle). This throws into sharp relief the peculiar character of our more recent recoveries. From the 1940s through the 1980s, recovery was accompanied by significant job growth—on the order of between 10 and 20 percent after four years. In our last three recessions, by contrast, we actually continued to lose jobs through the first months of “recovery,” and then added jobs at a glacial pace.

In 2003-4 and again over the last three years, this combination is often passed off as a curiosity: a “jobless recovery” in which the economy gets better but the labor market doesn’t. But that’s not really what’s happening. Job growth is slow because the recovery is slow. From the 1940s through the 1980, recoveries were relatively short and robust—usually adding about 10 percent to GDP in the first two years after the trough of the business cycle. In the 1991-3 recovery, GDP grew only 6 percent. In 2001-3, GDP grew only 5.9 percent. In the first two years of our current recovery (through July 2011), GDP grew only 4.4 percent. That’s not a jobless recovery. It’s no recovery at all.