The NYT has a good article on how millions of workers are likely to face prolonged joblessness as a result of the current recession. The article implies that there has been a change in the relationship between economic growth and employment in recent decades as it has taken longer for the economy to recovery the jobs lost in the last two recessions than in prior recessions. While it has taken longer to recover the jobs lost in the downturn, this has nothing to do with a changed relationship between growth and jobs. The problem is simply that growth has been very weak. Here is the cumulative growth in the 8 quarters following the end of the last 5 recessions: 1970(IV)-1972(IV) -- 8.9% 1975(I)-1977(I) - 9.8% 1982(IV)-1984(IV) - 13.5% 1991(I)-1993(I) -- 6.0% 2001(IV)-2003(IV) -- 5.9% As can be seen the growth coming out of the last two downturns has been very weak by historical standards. Most projections show that the growth coming out of the current recession will be similarly weak. In short, there is no mystery about the economy's failure to create jobs. Weak growth typically means weak job creation. btw, the explanation for the slower growth following the last two downturns and projected for this recovery is not difficult. The 1990-91 recession was not countered with any fiscal stimulus. In fact, the government put in place a deficit reduction package at the start of the recession (not the cause, but it didn't help). In other words, we had really stupid policy, but in Washington, we don't ever say such things. The 2001 recession, like current one, was caused by the collapse of a bubble. It is very difficult to reverse the effects of a collapsed financial bubble.
--Dean Baker
--Dean Baker
