Jobs and growth are still linked (that is, Okun’s Law still holds)
Laurence Ball, Daniel Leigh, Prakash Loungani 26 January 2013
Will recovery be jobless? A broad array of analysts, from Vox columnists to McKinsey, are arguing that Okun’s Law is broken. This column presents new research suggesting that, in fact, Okun is alive and well. When output recovers, the jobs will come back, although employment will differ across countries. There may be good reasons for the structural reforms that many propose as a way to boost job creation, but undertaking them in the belief that Okun’s Law has broken down should not be one of them.
Unemployment rates remain high in most advanced countries. Many scholars have drawn attention to an apparent decoupling of unemployment increases from output declines during the Great Recession (e.g. IMF 2010, Cazes et al. 2011).
Global crisis Labour markets
unemployment, jobless recovery, Okun, output
US unemployment: Neither natural nor unnatural
Guillermo Calvo, Fabrizio Coricelli, Pablo Ottonello 24 July 2012
Economic output in the US seems to have recovered since the Great Recession – but jobs have not. This ‘jobless recovery’ has led economists to argue that unemployment has reached a point where it can fall no further without further inflation. This column disagrees, suggesting the nature of the crisis affects the nature of the recovery.
The Great Recession in the US has been followed by high and persistent unemployment. Although output recovered its pre-crisis level, the unemployment rate is still above its pre-crisis level, a situation that is popularly called ‘jobless recovery’ (see Figure 1).
Figure 1. US jobless recovery
Global crisis Global economy Labour markets
US, unemployment, jobless recovery, Great Recession
The case of the US jobless recovery: Assertive management meets the double hangover
Robert J. Gordon 22 August 2011
The US is missing millions of jobs. This column argues that the total is 10.4 million. It claims that 3 million of these can be traced to the weakened bargaining position of labour and the growing assertiveness of management in slashing costs to maintain share prices. Moreover, this employment gap is not shrinking because of the ‘double hangover’ effect—an excess housing supply and besieged consumers unwilling to spend.
High and persistent unemployment in the US has emerged as one of the most important macroeconomic legacies of the 2007-09 world economic crisis. While the decline of business activity in the US was no larger than in Europe, the US is an outlier in its outsized response of the unemployment rate to its decline of output (IMF 2011).
Here we quantify the shortfall of US employment – some 10.4 million missing jobs – and ask: Why did the number of jobs decline so much and why has it recovered so little? Two sets of causes stand out.
US, US economy, jobless recovery, US jobs
The Great Recession ended in May 2009: Evidence from unemployment and the stock market in the last fourteen recessions
Roger E. A. Farmer 05 October 2009
Has the US recession already ended? This column says that it very likely has, based on evidence from the last fourteen recessions. It predicts that the NBER will declare that the recession ended in May 2009. But that doesn't rule out the dangers of a double dip or jobless recovery.
A number of economists, including Chairman Bernanke of the US Federal Reserve, have declared that the current recession is very likely over (Robb, 2009), and two reporters for Forbes (Wesbury and Stein, 2009) have dated the end of the recession to May 2009. This column adds credence to that statement by studying the past behaviour of the stock market and the unemployment rate.
Global crisis Macroeconomic policy
recession, NBER Business Cycle Dating Committee, jobless recovery, double dip