Jobless Recoveries


Stacey L. Schreft and Aarti Singh have a good article on 'jobless recoveries' up in the Federal Reserve Bank of Kansas City Economic Review Second Quarter 2003.

Summary:

  • Recovery from 1990 and 2001 recessions was much slower than previous recessions.
  • Employment has not grown, but has continued to decined since economy "bottomed out".
  • This is not only due to slower recovery, because by Okun's Law should have some employment growth when economy grows.
  • Just-in-time employment practices, such as overtime and use of temporary workers, grew in these recoveries, while less-flexible employment such as permanent full-time workers continued to decline.
  • Employers substitute just-in-time employees for permanent full-time workers.
  • Part-time employment has increased as well, and we do not have good statistics for it, in that anyone who works more that 35 hours total is considered full-time, even if they work a second job that is part-time.
  • Use of temporary workers does not increase joblessness, but moves jobs counted from manufacturing to temp help firms.
  • Had overtime not increased in the first year of the current recovery, 71,000 positions in manufacturning could have been saved. In the 1991 recovery, substituting full-time positions for overtime would have saved 108,000 manufacturing jobs.
  • Indirectly, use of just-in-time employment has kept people from being hired until businesses know the recovery is coming. Without employment to support consumption, this lack of hiring contributes to weakness in the economy. Also, temporary or part-time employees lack confidence about future prospects of employment, thus causing them to prefer saving to consuming.


Go check out the PDF linked above; the graphs are most edifying.

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