The growing case for a job-loss "recovery"

[Beet]

Underneath the usual total unemployment numbers are the reasons an individual is unemployed: You are on temporary layoff; you quit your job; you have reentered the labor market and have yet to find a job; or you are entering the job market for the first time and have yet to find a job. Or, finally, you have been permanently separated from your previous employer, who has no expectation of hiring you back.

The last category is the dominant reason for unemployment at this time. That might not seem surprising, but it actually is. Never, in the six recessions preceding the latest one, did permanent separations account for more than 45 percent of the unemployed. The current percentage stands at 56 percent as of September and appears to be still climbing:

[Swing low, sweet chariot. Comin' for to carry me home.]

you have been permanently separated from your previous employer, who has no expectation of hiring you back.

The last category is the dominant reason for unemployment at this time. That might not seem surprising, but it actually is. Never, in the six recessions preceding the latest one, did permanent separations account for more than 45 percent of the unemployed.

well, given the fact that this has been the worse economic downturn since the Great Depression, how can this be a surprise to anyone?!

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The current percentage stands at 56 percent as of September and appears to be still climbing:

as the chart clearly shows, “permanent separations” have continued to climb during the initial stages of the last six recoveries.  So, this certainly does NOT support a case for a job-loss recovery.

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Sorry to take you to the wood shed, Beet, but your claims of:

1)   a “surprise” finding in “permanent separations” statistics is only a surprise because you’re comparing this recession to more milder recessions
2)   a job-less recovery based upon the fact “permanent separations” continue to climb, can only be argued if you ignore the fact this trend has been in case at the this stage of the last six recoveries.

In short, to make your first point, your chose data points using the past six recessions that are not comparable to the magnitude of this recession; and then, to make your second point, you turn right around and ignore the very facts of the last six recessions you chose in comparison to make your first point.

[Beet]

My case (or rather, the data's case) is for a job-loss "recovery", a nominal GDP recovery where we continue to lose jobs. Your pointing out that the previous six recessions were milder than the current recession doesn't help you refute that point. It only magnifies the point. The 2001-2003 recovery, for example, was a job-loss recovery, the first real postwar job-loss recovery. And that followed a very mild recession. If the 2001 recession can be followed by a job-loss recovery, why can't the 2009 recession?

Let me just point out that in the 1982 recession, the unemployment rate peaked at 10.8% in November, whereas today the unemployment rate is only 9.8%. But in 1982, the permanent separation rate peaked at under 45%, whereas today it is already 55%. So yes, there is reason for surprise here. If you were expecting a repeat of the 1983 V-shaped recovery, then why would permanent separations be 55% and not 45%?

Finally, I am looking at the absolute fraction of permanent separations, not the fact that it continues to climb (although it does). If it was at 45% and climbing, the case for a job-loss recovery would not be nearly as strong.

[phk]

There are two separate feedback mechanisms operating in the current macro-economy.

*The first is that rapidly rising output will eventually bring hiring up with it.

*The second is that the high unemployment rates will bring more foreclosures and cause spending and output to sputter.

Which is it going to be? Nonfarm payroll employment is the key indicator to watch from here.

[Swing low, sweet chariot. Comin' for to carry me home.]

My case (or rather, the data's case) is for a job-loss "recovery", a nominal GDP recovery where we continue to lose jobs. Your pointing out that the previous six recessions were milder than the current recession doesn't help you refute that point. It only magnifies the point.

Actually, I don’t need to refute the point, for you haven’t used any valid point to make a case for it yet.

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The 2001-2003 recovery, for example, was a job-loss recovery, the first real postwar job-loss recovery. And that followed a very mild recession. If the 2001 recession can be followed by a job-loss recovery, why can't the 2009 recession?

Probably because you define the last recovery timeline as “2001-2003” and I define it as “2001-Dec2007”.  If you’re going to define “recovery” as the INITIAL STAGES of the expansion phase of the business cycle, then I would certainly AGREE that this “recovery” will be job-loss, as is every “recovery” defined under those terms.  Which is why employment is accepted as a lagging indicator.

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Let me just point out that in the 1982 recession, the unemployment rate peaked at 10.8% in November, whereas today the unemployment rate is only 9.8%. But in 1982, the permanent separation rate peaked at under 45%, whereas today it is already 55%. So yes, there is reason for surprise here. If you were expecting a repeat of the 1983 V-shaped recovery, then why would permanent separations be 55% and not 45%?

Finally, I am looking at the absolute fraction of permanent separations, not the fact that it continues to climb (although it does). If it was at 45% and climbing, the case for a job-loss recovery would not be nearly as strong.

The change in the “permanent separation” ratio could be caused by many factors including, but not limited to:

1) the pace of contraction

2) the fact that the recovery preceding the 1982 recession only brought unemployment down to ~7.3% and the increase to ~10.8% represented an increase in unemployment rate of only 3.5%, whereas in this recession the increase in unemployment is already >5% and will probably end up being a 6% increase (from ~4.5% to ~10.5%).

3) a change in demographics (e.g. the trend towards two income families).  

[○∙◄☻¥tπ[╪AV┼cVê└]

My case (or rather, the data's case) is for a job-loss "recovery", a nominal GDP recovery where we continue to lose jobs. Your pointing out that the previous six recessions were milder than the current recession doesn't help you refute that point. It only magnifies the point. The 2001-2003 recovery, for example, was a job-loss recovery, the first real postwar job-loss recovery. And that followed a very mild recession. If the 2001 recession can be followed by a job-loss recovery, why can't the 2009 recession?

Let me just point out that in the 1982 recession, the unemployment rate peaked at 10.8% in November, whereas today the unemployment rate is only 9.8%. But in 1982, the permanent separation rate peaked at under 45%, whereas today it is already 55%. So yes, there is reason for surprise here. If you were expecting a repeat of the 1983 V-shaped recovery, then why would permanent separations be 55% and not 45%?

Finally, I am looking at the absolute fraction of permanent separations, not the fact that it continues to climb (although it does). If it was at 45% and climbing, the case for a job-loss recovery would not be nearly as strong.

Interestingly, the worst 3 recessions since the Great Depression in terms of the number of months for the number of jobs to return to its original value are

1. George W Bush's other recession
2. other George Bush's recession
3. Reagan's recession

Seeing as this recession will likely take first place, there seems to be a bit of the pattern. Namely, workers get more and more screwed.