Economists at the Federal Reserve Bank of San Francisco put out a research report today raising the prospect of yet another jobless recovery. Here we go again?
Those of you playing along at home will remember that recessions in the 1970s and 1980s came with big spikes in unemployment—but once the economy ticked up, jobs rushed back in. By contrast, the recoveries after the 1991 and 2001 recessions were “jobless.” GDP got its groove back, but employers didn’t hurry to refill their ranks.
To date, the current recession looks like what we saw in the 1970s and 1980s, write the San Francisco Fed researchers—Mary Daly, Bart Hobijn and Joyce Kwok. In other words, lots of firing and little hiring. (In 1991 and 2001, the lack of hiring played a much more pivotal role in boosting unemployment than did actual firing.) So, if we lost jobs more aggressively on the downside, then maybe we’ll get them back more quickly during the upswing?
Maybe not. The economists focus on two data points that they feel indicate a jobless recovery in the wings. First, the notable lack of temporary layoffs:
The fraction of workers who are on temporary layoffs as a share of total unemployment has recently been low relative to the 1980s, suggesting fewer workers are waiting to be called back to jobs when the economy improves. Consider the difference between the recession of 1981–1982 and the current downturn. Between July 1981 and November 1982, the share of unemployed workers on temporary layoffs increased dramatically from 16.1% to 20.7%. By contrast, between December 2007 and April 2009, the share of unemployed workers on temporary layoffs fell from 12.8% to 11.9%.
Second, the uncharacteristically high number of workers who are involuntarily working 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.
When sales pick back up, businesses don’t have to go out and hire more people—they simply return their workers to full-time schedules.
Put those two things together, and you’ve got an economic recovery without a particular jump in job growth. The implication, according to the economists: “a longer and slower recovery path for the unemployment rate.”