Posted by Sir Four at 12:23pm Oct 11 '12[private] has argued that the current US recession should have followed a pattern, seen in previous recessions, where jobs return at a pace similar to the rate at which they were lost. My view is that this pattern has given way to something new, beginning in 1991, increasing in 2001, and exploding in 2007. Each of these were subsequently followed by slower job growth. In fact, it was the post-2001 recession for which the term "jobless recovery" was coined.
One old pattern has continued to hold true, by the way: the stock market rallies and corporate profits recover following the recession. This happened post-2001. This happened again post-2007. Here's the graph of corporate profits:
Source: NYTimes
Here's the S&P 500:
But, with increasing severity each time, what we see on the jobs front is a delayed and modest pace of recovery. So, in a sense, the post-2007 recession is another "jobless recovery"--even worse than last time. Stocks are up, corporate profits are up, people with higher incomes are doing well, but the job openings are sparse for everyone else. Free trade with emerging markets that offer labor at terms with which no lower-skilled American can compete has contributed. Automation through software and robotics has contributed. Demanding employees take on the work of their laid-off coworkers has contributed.
Corporations can simply get more done with fewer domestic employees, so demand for workers is soft and will remain soft. This is the new normal, folks.
But isn't it Obama's fault that jobs did not bounce back quickly like in 1981 or other recessions of history? His policies must've stunted economic growth, right?
In a word: No.
The US is not under-performing comparable economies around the world. Here's a set of growth index comparisons (source):
One old pattern has continued to hold true, by the way: the stock market rallies and corporate profits recover following the recession. This happened post-2001. This happened again post-2007. Here's the graph of corporate profits:
Source: NYTimes
Here's the S&P 500:
But, with increasing severity each time, what we see on the jobs front is a delayed and modest pace of recovery. So, in a sense, the post-2007 recession is another "jobless recovery"--even worse than last time. Stocks are up, corporate profits are up, people with higher incomes are doing well, but the job openings are sparse for everyone else. Free trade with emerging markets that offer labor at terms with which no lower-skilled American can compete has contributed. Automation through software and robotics has contributed. Demanding employees take on the work of their laid-off coworkers has contributed.
Corporations can simply get more done with fewer domestic employees, so demand for workers is soft and will remain soft. This is the new normal, folks.
But isn't it Obama's fault that jobs did not bounce back quickly like in 1981 or other recessions of history? His policies must've stunted economic growth, right?
In a word: No.
The US is not under-performing comparable economies around the world. Here's a set of growth index comparisons (source):
The US recession, in proper context - Sir Four