Jobless recovery aka Productivity-cushioned recess…

Jobless recovery aka Productivity-cushioned recession

There’s much being said of the unprecedented nature of this recovery. GDP is rising at healthy levels, but unemployment is riding high. Usually, recoveries are caused by more input being made by more workers. The current recovery is unusual because increased production is up because productivity of the folks that still have jobs is increasing, not because more people have jobs.

So this is why Arnold Kling says that the better way to describe the recovery is to not call it a recovery at all. He prefers the term “productivity-cushioned recession”.

To me, the distinction is important depending on your priorities. If you think that its important for the country to have maximum employment (basically, everyone that wants a job can get one) then you prefer Kling’s description of the current economy. If you believe a country should have maximum income, then you’ll side with the folks that are calling this a jobless recovery.

I’m not very concerned about the unemployment rate. You have to have some unemployment rate because folks in between jobs take some time to get a new job. In some sense, the rate is an indication of how long it takes to get a job after you’ve lost your previous job. The very long term view on unemployment shows us to be within historical norms. The ongoing policy challenge is to find ways to make it easier for folks to switch jobs. This means it needs to be easy to find jobs and it needs to be easy to retrain folks for new/different industries.

One way to interpret the current joblessness is to see the 90’s as a time when new industries were being created. In these new industries there was low barrier to entry for workers. Any Joe Schmo could learn to code html, quit his job and join the dot com craziness. This had the effect of reducing the average time between jobs. When we all sobered up and realized that there is more to it then slapping up some web pages, the bubble crashed and Joe couldn’t easily find a web jockey job. This had the effect of increasing the time it took to get a job (i.e. there’s no easy jobs to be taken) and thus increase the structural unemployment rate.

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