Friday, July 24, 2009

A Jobless Recovery?

The financial news around us has been relatively positive lately - sales of previously occupied homes rose for the third month in a row in June, the first time that's happened since 2004. But there's one piece of the puzzle that doesn't appear to be getting any better: Unemployment. First-time unemployment claims jumped by 30,000 last week, according to a Labor Department report that came out yesterday.

That's no surprise: As we said earlier, economists expect unemployment to reach 10 percent before it starts to improve again. But people are starting to wonder, how can we have an economic recovery with unemployment still in the doldrums?

The term jobless recovery dates back to the early 1990s, when we emerged from a mild recession at the end of the first President Bush's term. Subsequent recessions have also seen employment figures recover much more slowly than after earlier recessions. This may be the result of automation creeping into our lives; certainly many industries require fewer workers than they did a generation ago.

There are also two structural factors that may impede job growth after this recession. According to the Wall Street Journal, very few of today's unemployed are workers who have been laid off temporarily - only 11.9 percent of all the unemployed are in that situation, and that number has dropped in recent months. By contrast, in the 1982 recession, more than 20 percent of the unemployed were on temporary layoffs. The Journal also found that there's a very high number of people working less than full-time involuntarily - more than 5 percent of all workers, an all-time high for that statistic. So when their companies start expanding, they can simply increase the hours given to current employees rather than hiring new ones.

So yes, a jobless recovery is a very real possibility. It's something we'll be keeping our eyes on in the months to come.

No comments:

Post a Comment