Today, the National Bureau of Economic Research announced that the recession ended well over a year ago, in June 2009. This is, of course, a technical definition, based on the relative expansion of the economy; the economists at the bureau -- and certainly the rest of us -- well understand that our economic doldrums are not over and this is nothing to celebrate. If anything, it makes for uncomfortable foreshadowing; as the NBER observes, "any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007." In other words, the dreaded double dip.
On that front, the Roosevelt Institute's Mike Konzcal and Arjun Jayadev have a new paper [PDF] that examines data on the labor market and comes to some depressing conclusions: They argue against the idea that high levels of current unemployment are a structural problem -- that is, unrelated to economic conditions but rather evidence of a skills mismatch where unemployed workers are simply unqualified for existing jobs. While that argument is often deployed by those who argue that policy responses to unemployment are unnecessary, Konzal and Jayadev's analysis concludes that "people with the skills to work their jobs are more likely to be working part-time for economic reasons in 2010 than they were before the recession. This is a story of aggregate demand, not a story of skills mismatch."
While that's depressing, it also suggests that further stimulus can be effective in turning around the labor market. Less promising is this finding from their paper: Since the beginning of 2009, an unemployed person is more likely to drop out of the labor force than find a job. Worse: This has not happened before, or at least not since 1967, when this kind of data began to be collected. This suggests that we may be seeing the kind of normalizing of high unemployment through hysteresis that makes this recession unlike others we've seen since the Great Depression. It's not clear to me that policy-makers, especially on the right, recognize how deeply the labor market has been affected by the recession.
-- Tim Fernholz
