Tuesday, September 27, 2011

Continued US Joblessness Comes From Weak GDP Growth: Current Jobless Rate Post Recession Typical Of Past Weak Recoveries

From Federal Reserve Bank of Cleveland Economic Commentary "This Time May Not Be That Different: Labor Markets, the Great Recession and the (Not So Great) Recovery" by Murat Tasci:
net job creation has also been relatively anemic, and we have gained back less than 20 percent of the jobs that were lost during the recession. The situation has analysts asking if this “jobless recovery” means that there is now something fundamentally different about the labor market.

In this Commentary, we show that the labor market’s performance has largely been consistent with the path of output during the recession and the subsequent recovery. The jobless nature of the current recovery stems from weak GDP growth. There is little evidence of a fundamental change in the labor market. [Emphasis added].

Source: Federal Reserve Bank of Cleveland

The figure shows a relatively strong correlation between GDP growth and employment growth in recoveries. The current recovery is located in the southwest corner of the chart—indicating that the recovery has experienced both weak GDP growth and weak employment growth. Indeed, based on the patterns observed in prior recoveries, payroll employment growth is just where one would expect it to be given the growth in GDP. Moreover, all the previous recovery episodes that did not lead to significant employment gains—the jobless recoveries—are associated with weak output recoveries. [Emphasis added].
Read the complete commentary here.

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