Reasons for Jobless Recoveries
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  Reasons for Jobless Recoveries
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Author Topic: Reasons for Jobless Recoveries  (Read 4234 times)
Bo
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« on: December 21, 2009, 03:53:47 PM »
« edited: December 21, 2009, 09:26:52 PM by Mendeleev »

Before the 1990s, typically when a recession ended massive job growth followed immediately. However, this changed in 1990-1991, when job growth significantly lagged behind other economic indicators. This occured again in 2001-2003 and will probably occur again in 2010. What do you think causes these jobless recoveries?

I'd say the fact that productivity increased much more rapidly starting from about 1995 and thus companies were able to produce as much output without hiring less people. I also think that part of it is due to globalization and the fact that many U.S. comapnies now make jobs in other countries (China, India, etc.) as well as the U.S., which prevents large job growth in the U.S. immediately following a recession. Finally, I think companies began to reduce people's work hours instead of firing them during bad times, and thus comapnies give their exisiting workers more hours to work before hiring new workers. Well, I would like to hear other people's thoughts on this.
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opebo
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« Reply #1 on: December 21, 2009, 04:06:44 PM »

Yes, the jobs are elsewhere, and they pay $6/day.
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MK
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« Reply #2 on: December 21, 2009, 04:35:11 PM »

Yes, the jobs are elsewhere, and they pay $6/day.


 "That Giant Sucking Sound"
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Mint
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« Reply #3 on: December 21, 2009, 05:53:45 PM »
« Edited: December 21, 2009, 05:57:35 PM by KRAMPUS™ »

Yes, the jobs are elsewhere, and they pay $6/day.


 "That Giant Sucking Sound"

^^^^

Until we revive our manufacturing base, help small business and stop the gobbling up of industry by a few politically connected parasites there is no 'recovery.' But that's besides the point. Unemployment and inflation numbers were bogus before even this crisis happened anyway, that's why people constantly said the economy was poor 4 years ago even when it was 'booming'...
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phk
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« Reply #4 on: December 21, 2009, 07:21:01 PM »
« Edited: December 21, 2009, 07:28:29 PM by phknrocket1k »

Because productivity growth (through either technological advancements or globalization (or both together in tandem, like the outsourcing of customer service jobs to Bangalore, India)) more or less is able to keep pace with output growth.

In the early 2000s, we basically had a jobless recovery because productivity grew at like 3% to 4% per year until 2004 (which was faster than the corresponding growth in output). There are many hypotheses for this, one that I agree with most is that most of the investments in computer and information technology were actually paying dividends at a lagged pace since there likely was a huge increase in potential productivity resulting from the massive increase in corporate investment and spending in late 1999.

When output growth finally exceeded productivity growth, we actually started seeing jobs created in Q1 2004.

Here is a general metric.

  • Output Growth > Productivity Growth should imply job creation is occurring or will occur (and is positive).
  • Output Growth = Productivity Growth should imply a wash in terms of the substitution and scale effects.
  • Output Growth < Productivity Growth should imply that job creation is negative or could possibly be staying at zero.

Intuition is that as output is increasing, if productivity can keep pace with it, the existing labor force is adequate enough and additional hiring may actually cause overproduction.
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Beet
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« Reply #5 on: December 21, 2009, 08:56:43 PM »

That makes sense theoretically, but it does not fully explain the original poster's question; if fast productivity growth was necessarily a cause of 'jobless recoveries'; or rather, a permanent sub-job (i.e., subpar jobs) economy, then we would have expected high unemployment during expansion that had high productivity growth. As we know this is not true. In the World Economy Between the Wars, productivity growth for 1950-73 is listed as 4.77 for Western Europe, 2.77 for the United States, and 7.74 for Japan, compared to 1.56, 2.48, and 1.80 respectively for 1913-1950, when unemployment was much higher.

Could the safety of the dollar be creating some kind of "premium" that keeps the dollar overvalued, both directly (through currency pegs) and indirectly (on the so-called 'free [currency] market') which in turns encourages Americans towards borrowing at the cost of producing? For it makes borrowing cheaper and producing less lucrative. In a perverse way, the world is trying to 'repay' America for the currency safety we provide by lending and selling to us at a discount. This in turn creates distortions in the domestic economy.
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phk
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« Reply #6 on: December 22, 2009, 05:34:05 PM »

That makes sense theoretically, but it does not fully explain the original poster's question; if fast productivity growth was necessarily a cause of 'jobless recoveries'; or rather, a permanent sub-job (i.e., subpar jobs) economy, then we would have expected high unemployment during expansion that had high productivity growth. As we know this is not true. In the World Economy Between the Wars, productivity growth for 1950-73 is listed as 4.77 for Western Europe, 2.77 for the United States, and 7.74 for Japan, compared to 1.56, 2.48, and 1.80 respectively for 1913-1950, when unemployment was much higher.

I think it may be the changing nature of productivity from earlier recoveries to modern recoveries.

I think around the 1970s, technological improvements (and additional capital investments) complemented labor, so as firms could scale up production they could employ both capital and labor in increasing amounts.

While modern-day, technological improvements we see that technology (coupled with globalization, as mentioned above) can outright substitute for labor in many cases.
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Beet
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« Reply #7 on: December 22, 2009, 05:37:20 PM »

That makes sense theoretically, but it does not fully explain the original poster's question; if fast productivity growth was necessarily a cause of 'jobless recoveries'; or rather, a permanent sub-job (i.e., subpar jobs) economy, then we would have expected high unemployment during expansion that had high productivity growth. As we know this is not true. In the World Economy Between the Wars, productivity growth for 1950-73 is listed as 4.77 for Western Europe, 2.77 for the United States, and 7.74 for Japan, compared to 1.56, 2.48, and 1.80 respectively for 1913-1950, when unemployment was much higher.

I think it may be the changing nature of productivity from earlier recoveries to modern recoveries.

I think around the 1970s, technological improvements (and additional capital investments) complemented labor, so as firms could scale up production they could employ both capital and labor in increasing amounts.

While modern-day, technological improvements we see that technology (coupled with globalization, as mentioned above) can outright substitute for labor in many cases.

Interesting, and a plausible explanation. What technological improvements complemented labor before the 1970's and now substitute for labor?
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phk
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« Reply #8 on: December 22, 2009, 05:45:19 PM »
« Edited: December 22, 2009, 05:54:46 PM by phknrocket1k »

That makes sense theoretically, but it does not fully explain the original poster's question; if fast productivity growth was necessarily a cause of 'jobless recoveries'; or rather, a permanent sub-job (i.e., subpar jobs) economy, then we would have expected high unemployment during expansion that had high productivity growth. As we know this is not true. In the World Economy Between the Wars, productivity growth for 1950-73 is listed as 4.77 for Western Europe, 2.77 for the United States, and 7.74 for Japan, compared to 1.56, 2.48, and 1.80 respectively for 1913-1950, when unemployment was much higher.

I think it may be the changing nature of productivity from earlier recoveries to modern recoveries.

I think around the 1970s, technological improvements (and additional capital investments) complemented labor, so as firms could scale up production they could employ both capital and labor in increasing amounts.

While modern-day, technological improvements we see that technology (coupled with globalization, as mentioned above) can outright substitute for labor in many cases.

Interesting, and a plausible explanation. What technological improvements complemented labor before the 1970's and now substitute for labor?

An everyday example that I see here in San Diego is in grocery stores and some fast food restaurants.

When checkout aisles and cash registers were being installed, you needed 1 person to use each new cash register machine that you had invested in. Near perfect complements

While now, many grocery stores here are installing automated robotic cash registers. They normally have 1 person supervising 4 cash registers per store. Somewhat complements, but more substitutable.

Even with the internet and in upper-tier industries I'v heard of Indian doctors reading X-Ray's and Indian Accountants doing tax returns. Near perfect substitutes.

I basically see productivity boosting mechanisms as doing one of two things (or maybe a combination thereof).

1.) Complementing human tasks.
2.) Substituting human tasks.

In fact its really what I attribute to the changing nature of the economy from being agricultural to manufacturing to services.
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jfern
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« Reply #9 on: December 23, 2009, 01:35:40 AM »

"Free" trade
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memphis
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« Reply #10 on: December 23, 2009, 10:10:10 AM »

Too much wealth concentrated in the hands of too few people. How many cars do expect Paris Hilton to go out and buy?
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opebo
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« Reply #11 on: December 23, 2009, 12:41:23 PM »
« Edited: December 23, 2009, 12:43:53 PM by opebo »

The real reason is related to productivity, but not in the ways that posters above have said.  It is this - due to productivity increases since the 30s, we should now have about a 20 hour work week.  Instead, due the political power of the owners, even the 40 hour work week has been lost for most.   

We simply need state imposed redistribution.  The idea that any of this is 'economic' rather the political is the canard we need to reject.

If we lived in a society where working was simply one of many options available to the non-owning class - alongside living on a comfortable dole, attending university in adulthood, etc. - and jobs payed a handsome living for working 20 hours a week, we would have no economic problems.  Instead, we have concentration of power, enslavement of the many, and the instability which results.
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phk
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« Reply #12 on: December 24, 2009, 05:53:02 PM »

Too much wealth concentrated in the hands of too few people. How many cars do expect Paris Hilton to go out and buy?

How come all growth has to be consumption driven? Why not investment?
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jokerman
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« Reply #13 on: December 24, 2009, 07:06:49 PM »

Too much wealth concentrated in the hands of too few people. How many cars do expect Paris Hilton to go out and buy?

How come all growth has to be consumption driven? Why not investment?
The ultimate goal of economy is consumption, is it not?  Even investment is based upon the premise of future consumption.
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MK
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« Reply #14 on: December 24, 2009, 07:43:34 PM »


The real teaparty should be taking place when the shipment of Chinese made products arrive to our ports.
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phk
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« Reply #15 on: December 24, 2009, 08:38:13 PM »

Too much wealth concentrated in the hands of too few people. How many cars do expect Paris Hilton to go out and buy?

How come all growth has to be consumption driven? Why not investment?
The ultimate goal of economy is consumption, is it not?  Even investment is based upon the premise of future consumption.

True, investments in capital goods does increase the demand for labor (though maybe not so much these days).

One of the most important things a society needs is to have an entrepreneurial spirit (at least the upper tier).
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opebo
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« Reply #16 on: December 26, 2009, 05:55:30 AM »


The real teaparty should be taking place when the shipment of Chinese made products arrive to our ports.

But please remember that the enemy responsible for this is not the China-man, but our own owners.
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phk
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« Reply #17 on: December 28, 2009, 12:56:49 AM »

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http://econlog.econlib.org/archives/2009/12/another_recalcu.html
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phk
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« Reply #18 on: December 28, 2009, 04:37:59 AM »

Even more...

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More stuff made by fewer people.
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jokerman
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« Reply #19 on: December 28, 2009, 04:41:58 PM »

And now we know that the U.S. has less private employment now than in December 1999.
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opebo
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« Reply #20 on: December 29, 2009, 05:25:45 AM »

Even more...

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More stuff made by fewer people.

And even even those fewer people are more underpaid.  $234,000??  And we can't pay people $35/hour??
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Derek
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« Reply #21 on: January 25, 2010, 03:20:24 AM »

Jobs are usually the last thing to go moving toward a recession and the last thing to come when the economy is turning around. Jobs are also a great indicator as far as how well the economy is doing. The only better indicator is the GDP rate.
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jokerman
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« Reply #22 on: January 25, 2010, 02:20:08 PM »

Jobs are usually the last thing to go moving toward a recession and the last thing to come when the economy is turning around. Jobs are also a great indicator as far as how well the economy is doing. The only better indicator is the GDP rate.
Congratulations, you've completed intro to macroeconomics.  This add little to what we are talking about in this thread, which is rather the question of why in the last couple decades there has been a considerably longer lag develop between the GDP minimum and the employment minimum.
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A18
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« Reply #23 on: January 26, 2010, 01:35:55 PM »

"Jobless recovery." Must we abuse the English language?

Contrary to popular dogma, there is no reason whatsoever to think that higher levels of employment are per se more desirable. But if we want to spend time on this rather pointless question, relevant factors would be (1) population growth, (2) the diminished number of non-working women who might contemplate entering the labor force, and (3) retirement patterns.
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opebo
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« Reply #24 on: January 26, 2010, 02:45:17 PM »

Contrary to popular dogma, there is no reason whatsoever to think that higher levels of employment are per se more desirable.

They are so in your right-wing paradise, as, lacking a comfortable dole (or any dole at all), the lower classes experience unemployment as a dire and desperate descent into despair and death.
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