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 (note that this does not include economic output due engaging in money making activities outside of work). 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.
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.
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.
