The Bonddad Blog: By Way of Comparison

Friday, August 6, 2010

By Way of Comparison

Here are charts of the unemployment rates for the last two "jobless" recoveries.

Compare that to the current situation:

we're in about the same boat.

5 comments:

Steve said...: My suspicion is that the shift in how we get through recessions has changed because of three factors:

1) Technology - businesses are better able to save money and make use of the resources they have using efficiencies created by technology

2) Outsourcing - businesses that are uncertain about the economy can rely on contracted work from overseas until there's justification for building up their employment here. This is a double whammy because some will just stay with the overseas workers

3) Service economy shift - Manufacturing tends to more rapid recovery because generally you need a certain number of workers with a certain set of skills to return to productivity. You can't push existing resources to produce more, you have to simply hire people.

We can expect this to be the trend for future recessions as well. The problem of course is that this leads to a prolonged period of slow growth in the economy. It makes recessions, no matter how small, much worse. So we need to change how we deal with recession, though I'm not precisely sure what the best approach would be.; August 6, 2010 at 10:48 AM
Anonymous said...: Did we have all this constant birth.death adjustment and declining labor force participation rates in the other cited periods? This might be apples and oranges.; August 6, 2010 at 11:45 AM
esong_98 said...: I suspect that the economy will continue to shed jobs a couple of more months. State a local goverments are expected to layoff about 200,000 workers over the next couple of months. The economy would have been a lot worse had the senate not been able to break the GOP fillibuster on the jobs bill earlier this week. Thus, I'm more optimistic that the economy will barely avoid a double dip recession later this year.

The remaining census workers should soon all be laid off. Seasonal adjustment errors also probably made the employment picture look stronger than it really is because the auto companies did not go through with its annual summer shutdown. The payback will come next month and will make the next monthly report look very weak.

In 2011, the leading edge of the Baby-Boomers will reach retirement age. Part of the reason unemployment did not soar to 11 or 12 percent as it could have in this recession was because a large number of laid off Baby-Boomers are choosing early retirement. Thus, I suspect that the unemployment rate won't bounce back up as much as many economists expect once the job market improves. By the end of the decade, we could be facing worker shortages and this recession will seem like ancient history.; August 6, 2010 at 12:33 PM
Anonymous said...: You can't compare the unemployment rate from the 1990-1991 recession/recovery to the current one, because they're figured differently. During this "recovery", unemployment would be about a full percentage point higher if figured the same way as the 1990-1991 unemployment rate. Also, the employment/population ratio has declined 5% during this recession/recover while it decline only 2% during the 1990-1991 recession/recovery and 2.5% in the 2001-2003 recession/recovery.; August 6, 2010 at 1:02 PM
bonddad said...: Anon -

Please provide a link -- not merely a statement -- explaining why the difference in methodologies effects the comparison to such a degree as to render the comparison meaningless. Without supporting information, your statement is internet conjecture.

You are right the employment/population ratio has dropped, but you did not mention that as the population has gotten older the possibility of more employees leaving the workforce due to retirement has increased. Several months back, there was alot of attention paid to the "not in the labor force" number, with the assumption that the term meant people simply stopped looking for jobs. Yet this classification also includes people who retire.; August 6, 2010 at 1:58 PM