Why is this Job Recovery Different than All Others?
90 Pages Posted: 30 Jul 2012 Last revised: 28 Dec 2012
Date Written: July 27, 2012
The slow job recovery three years after the end of the recession of 2008-09 is characterized by persistently-high rates of unemployment. To understand this job recovery – different than all others –along with the economy’s large underutilized workforce, eleven key explanatory factors are considered. The first four factors – attributing the slow recovery to a deep, protracted recession or systemic banking crisis, coupled with an economic recovery not powered by the traditional driver of consumption and saddled with a second wave of public sector unemployment – are directly tied to the recent recession, are likely to be transitory and reversible, and reflect inadequate demand for labor. Currently-high levels of unemployment, however, are not just reflecting weak demand, but are equally the result of a distorted labor supply side. The next seven explanations represent long-term trends contributing to the decline in human capital, are not transitory, and predate and were not spawned by the last recession.
U.S. job creation has been affected by interconnected global economies. As part of fiercely-competitive post-2000 globalization, a shift has taken place from the old economic model of sharing productivity gains between labor and businesses. Globalization – manifested by U.S. multinational companies shifting employment overseas – has had a pernicious impact on domestic unemployment after 2000. Technological innovation has also increased the number of workers who are unemployed or have left the workforce, replaced by automation or lower-paying jobs overseas. Globalization, technological change and a corporate shift from labor to capital have contributed to polarization of the labor force, with the wages and job offers for low-skilled workers stagnating due to global competitive pressures. On the opposite end of the labor force, there is a dearth of highly-educated experienced workers. And the large middle class is being 'hollowed out' and not keeping pace with inflation or productivity gains. Prime-age men who had ‘dropped out’ of the labor force after 2000 constitute a major share of the underutilized workforce.
A more highly-educated and innovative workforce must be created to stimulate faster long-term economic growth by providing more-equal access to education and embracing technological change in an information-age economy. And creation of more productive domestic jobs will likely be supported by powerful trends in the global economy.
More than 50 charts and tables are included to visually display most of the observations noted above.
Keywords: unemployment, job recovery, labor market, recession, banking crisis, labor force participation, globalization, offshoring, technological innovation, eurozone, fiscal cliff, productivity, manufacturing, education, demographics
JEL Classification: E24, E32, E65, I22, J21, J40, J64
Suggested Citation: Suggested Citation