Jobless Recoveries in One Chart

March 25, 2014
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Here is a chart from Ed Leamer showing jobless recoveries after the last two recessions. There are several ways to see jobless recoveries in the data, but this one is particularly striking. It may take a little effort to follow it, but it is worth the effort.

On the horizontal axis is the total amount of hours worked. On the vertical axis is the total output of the business sector. Leamer plots hours and output since WWII. Before 2001, we saw a steady expansion of both output and hours–we move in the northeast direction of the chart.

 

houseofdebt_leamer

Recessions are times when we move to the southwest of the chart — hours and output drop. Recoveries should be times when we move back to the northeast–output and hours increase. That’s exactly what happened after all post WWII recessions, until 2001.

In 2001 and in the Great Recession, the recovery moves us straight north in the chart, not to the northeast. Output recovers, but jobs don’t.

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10 Responses to Jobless Recoveries in One Chart

  1. Salman Khan on March 25, 2014 at 10:38 ami

    Output recovers, but jobs don’t. Well the total amount of hours don’t change.. it could mean that jobs increase but every one works less hours leaving total hours unchanged. Also can we say something about average wages post 2001?

  2. Lazy guy on March 25, 2014 at 10:39 ami

    I, for one, welcome our more productive, less labor-intensive economy.

    • Domenicantonio on March 26, 2014 at 10:52 ami

      I agree in principle. In practice though it means that hosts of fellows are jobless, hence leading a life relieved from the onus of working, but in straits.

    • Bill on March 27, 2014 at 4:13 pmi

      There has been no increase in productivity, in fact we’ve seen a small decline. So you can welcome the less labor intensive economy which is looking a lot like an economy gone bad.

  3. Jimbo on March 25, 2014 at 11:20 ami

    Insightful. Great chart.

  4. Mike on March 25, 2014 at 11:34 ami

    Ideally, we’d want this demographically adjusted, right? Obviously doesn’t tell the whole story, but with Boomers retiring and women no longer increasing their rate of entrance to the workforce, hours could stall while output thanks to productivity gains keeps climbing.

  5. BananaGuard on March 25, 2014 at 1:46 pmi

    Line this chart up with some other recent ones and you see no coincidence, but perhaps a progression. Growth in hours worked doesn’t match growth in output in the latest chart – so productivity is growing faster? (Not what I heard.) The chart matching pay with productivity shows that all that improvement in productivity has not payed off for workers. The chart showing the failure of retail sales to return to trend seems linked to the failure of pay to rise. Then, once compensation lags productivity – and household borrowing capacity hits a snag, retail sales fall shy of the long-term trend.

  6. Jane Walerud on March 26, 2014 at 5:48 ami

    Managers say that they know they can rationalize their company, automating some tasks, cutting jobs, etc. They know they “ought to” do so for quite some time – years – without acting on that knowledge.

    In good times, the impact of cuts on morale would be too great.

    When a recession comes, they do what they’ve been planning for some time, automating and cutting jobs under cover of the bad times.

    When the economy recovers thereafter, they can then do more with fewer workers, permanently.

    Data to test this story might exist in the hollowing out of the middle class jobs, that are disproportionately cut in recessions and do not recover with the economy.

    • Matteo on March 27, 2014 at 12:00 pmi

      Magnitude of morale effects *inversely* related with the business cycle? That’s quite a novelty. Both common sense and the relevant literature claim the opposite: morale is important -hurt by treaths of redundancy and improved by efficiency wages- when labor market uncertainty is higher. From that point of view at least, at least, the boom not the bust is the right time for restructuring.

  7. Larry Signor on March 26, 2014 at 8:47 ami

    How many ways are there to say “capital rules”…this graph coincides nicely with one of Jared Bernsteins:
    http://jaredbernsteinblog.com/whos-economy-you-talkin-about/

    Given the data, Leamers graph is the only possible outcome.