Advancing a Free Society

The Abysmal Recovery in Employment

Monday, July 25, 2011

Job recovery in America has been disturbingly slow during the two years since the official end of the 2007-09 Great Recession. Unemployment has declined by only a single percentage point to 9.2% from its peak of 10.2% in 2009, while the percent of the adult population that is working is even lower than it was at the end of the recession. To put these figures in perspective, two years after the end of the severe recession of 1981-82, the unemployment rate was down by 3,6 percentage points from its peak of 10.8%, while the fraction working was up by 2,5 percentage points.

To be sure, while the recession of 1981-82 was the sharpest since the end of World War II prior to the Great Recession, it did not have as deep a financial crisis as the one that started in 2007. Although recoveries from financial crises are notoriously slow and erratic, the slowness of the current employment (and output) recovery is still obviously of great concern. The data on the duration of unemployment spells adds to the uneasiness. The great majority of workers can handle an unemployment spell of a few months since they can draw down savings, borrow from family members, live off a spouse’s earnings, and often qualify for unemployment compensation, Medicaid, and other government assistance programs. Unfortunately, however, many of the unemployed have been out of work for more than just a few months: over 40% have not had a regular job for at least 6 months, and almost one-third of the unemployed had not had a regular job for over a year.

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