Jobless Recovery Redux? Although the pace of layoffs appears to be subsiding and the overall economy is showing hints of stabilization, most forecasters expect unemployment to continue to increase in coming months and to recede only gradually as recovery takes hold. In this Economic Letter, we evaluate this projection using data on three labor market indicators: worker flows into and out of unemployment; involuntary part-time employment; and temporary layoffs. We pay particular attention to how these indicators compare with data from previous episodes of recession and recovery. Our analysis generally supports projections that labor market weakness will persist, but our findings offer a basis for even greater pessimism about the outlook for the labor market. Specifically, we suggest that the relatively low level of temporary layoffs and high level of involuntary part-time workers make a jobless recovery similar to the one experienced in 1992 a plausible scenario. (...) Even more dramatic, however, has been the break from past patterns in the number of workers who are involuntarily employed part-time. Numerous reports tell of workers being furloughed for a set number of days in a month or asked to work fewer hours each day. These anecdotes are supported by the monthly data. Indeed, the number of workers employed part-time against their wishes is at historical highs. The fraction of the labor force that reports working part-time for economic reasons has increased from 3.0% in December 2007 to 5.8% in April 2009. This increase has been broad-based, occurring in a wide range of occupations. Moreover, the reduction in hours has not been trivial, with more than half of such workers experiencing reductions of five hours per week or more.
Although the pace of layoffs appears to be subsiding and the overall economy is showing hints of stabilization, most forecasters expect unemployment to continue to increase in coming months and to recede only gradually as recovery takes hold. In this Economic Letter, we evaluate this projection using data on three labor market indicators: worker flows into and out of unemployment; involuntary part-time employment; and temporary layoffs. We pay particular attention to how these indicators compare with data from previous episodes of recession and recovery. Our analysis generally supports projections that labor market weakness will persist, but our findings offer a basis for even greater pessimism about the outlook for the labor market. Specifically, we suggest that the relatively low level of temporary layoffs and high level of involuntary part-time workers make a jobless recovery similar to the one experienced in 1992 a plausible scenario.
(...)
Even more dramatic, however, has been the break from past patterns in the number of workers who are involuntarily employed part-time. Numerous reports tell of workers being furloughed for a set number of days in a month or asked to work fewer hours each day. These anecdotes are supported by the monthly data. Indeed, the number of workers employed part-time against their wishes is at historical highs. The fraction of the labor force that reports working part-time for economic reasons has increased from 3.0% in December 2007 to 5.8% in April 2009. This increase has been broad-based, occurring in a wide range of occupations. Moreover, the reduction in hours has not been trivial, with more than half of such workers experiencing reductions of five hours per week or more.
a jobless recovery similar to the one experienced in 1992 a plausible scenario.
The interesting thing is that the last three recessions (1990-1, 2001 and the current one) have been followed by jobless recovery in the US... The brainless should not be in banking. — Willem Buiter
The difference in this case is not the recovery will be jobless, it is also that the recession is already a lot deeper than it was in 1991, and will get still worse. In the long run, we're all dead. John Maynard Keynes
In the long run, we're all dead. John Maynard Keynes
