The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.

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October 21, 2009

The growing case for a jobless recovery

The Wall Street Journal repeats the unhappy news:

"Companies across the economy are holding off on hiring even as the profit outlook improves, amid economic uncertainty and their own success at raising productivity in rough waters.

"Hiring always lags behind in economic recoveries, but the outlook this time is worse, many economists say. Most forecasters now expect a prolonged period of high unemployment, even though the government is expected to report next week that the economy grew in the third quarter, after four quarters of contraction."

I'd like to be able to contradict what most forecasters expect, but we at the Atlanta Fed have been building the case for a similar outcome on macroblog. Here are few salient points from previous posts.

Job opportunities are scarce. (Oct. 14, 2009)

"At the end of August there were estimated to be fewer than 2.4 million job openings, equal to only 1.8 percent of the total filled and unfilled positions—a new record low."

This development could, of course, turn around as business activity picks up, but there is more than a little evidence that some structural impediments are afoot.

Job losses have been disproportionately concentrated in small businesses. (Oct. 6, 2009)

As Melinda Pitts pointed out a few weeks back, businesses with fewer than 50 employees account for about one third of net employment gains in expansions. They have accounted for about 45 percent of job losses since the beginning of this recession. Given that these are the types of businesses most likely to be dependent on bank lending—and given that bank lending does not appear poised for a rapid return to being robust—the prognosis for an employment recovery in these businesses is a question mark.

The share of workers reporting that they have been involuntarily cut back to part-time is at a recorded high. (Aug. 14, 2009)

"… the increase in people reporting that they are involuntarily working part-time rather than full-time is considerably higher in this recession than in past recessions. Although the increase in these workers has moderated some since the spring of this year, the number of people in the category of working part-time for economic reasons remains at 8.8 million, well above the level of past contractions in both absolute and relative terms."

One potential implication of this fact is that firms probably have the capacity to expand production without hiring new workers (or increasing worker productivity). All these firms have to do is give more hours to existing workers, who have indicated they would be plenty eager to have them. Good for them—and good for GDP growth—but not much help on the employment front.

Here is one additional concern that we have not previously emphasized.

The percentage of employee separations labeled permanent is at a recorded high.

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:


Of course, none of this is proof positive that we are in for a "jobless recovery," but, to me, the odds appear to be increasing.

By David Altig, senior vice president and research director at the Atlanta Fed

October 21, 2009 in Labor Markets | Permalink


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Many of the jobs lost have been manufacturing jobs and obivioisly thing trickle down. But the reality is those jobs are not coming back, they have been out sourced. Secondly I think it is insane entirely base over economy's stability on the stock market. most of the firm that are gooding great are investing in third world countries and there progress is reported in the US being a US firm. so we really cant believe that will help the unemployment.

voyage home loans

Posted by: fharefinance@voyagehomeloans.com | October 21, 2009 at 06:03 PM


Regarding the access to credit for small business, the National Federation of Independent Business (NFIB) do not see it as a problem base on a survey of half million of their members.


See the "Small Business Economic Trends - October 2009" link in the "NFIB On The Move" section.

Here is Bloomberg's interview of William Dunkelberg, the chairman of NFIB. The interview on access to credit for small business start at 00:13:20 way into the interview.


At any rate, only 4% in the survey complained about access to credit. The real difficulty is a lack of customers. This also implies the demand for credit is low.

Do you have other data point that contradict this?

Posted by: silly things | October 21, 2009 at 06:17 PM

Is this recession similar to past ones in terms of employee reluctance to hire? We have heard casual comments about how the pending health care legislation, the cap and trade legislation, the expiration of tax cuts have all contributed to small business hesitating to hire. Is there data to support this claim?


Posted by: RK | October 21, 2009 at 06:35 PM

Every recession since 1990 has been followed by a jobless recovery, and the present one is unlikely to be any different. The mechanisms for robust and rapid growth in payrolls and wages just do not exist any more. Thanks to a lowering of international trade barriers, thanks to outsourcing and off-shoring, and thanks above all to Chinese labor’s entry into the global marketplace, workers in the first world have little or no bargaining power these days.

If anything, this lack of bargaining power is even more pronounced during economic downturns. Corporations increasingly take advantage of recessions to make dramatic cuts to payrolls, cuts that they would find politically inexpedient to make in good times. When the recovery comes (as it eventually must), the replacement hires are, more often than not, made overseas.

It is no coincidence that the last few recessions – specifically, those after China’s entry to world commerce – have been followed by jobless recoveries. Indeed, the shape of the world’s labor market today is such that ‘jobful’ recoveries are guaranteed not to happen.

A more detailed version of this analysis, along with an exploration of the policy implications, can be found here:

Thank you for reading!

Posted by: Meta Finance | October 22, 2009 at 09:59 AM

A jobless recovery is not a recovery. Nice try, though.

Posted by: wally | October 22, 2009 at 04:28 PM

How about "Growthless Recovery". Hmmm, that would be a nice research topic and I could even be nominated for economics nobel prizzzee...

Posted by: A Gupta | October 22, 2009 at 11:37 PM

I agree. It seems more and more like a jobless recovery.

My views on this and many other issues are available in my website: http://kunalsthoughts.weebly.com

Posted by: Kunal Kumar Kundu | October 23, 2009 at 06:04 AM

Jobless yes/recovery no the actual unemployment rate is closer to 14-15% when you take in account discouraged workers no longer receiving benefits .
What you are seeing now in the equity & housing market is strictly a dead cat bounce,pushed up by billions of dollars of liguidity close to 0% interest rates tied to unrealistically low mortgage rates 1st time buyers home rebate, cash for clunkers,
S&P500 PE at143 the 100s of billions given to the banks & investment houses has poured into the equity markets not into loans at the consumer level good luck the 2nd leg down is starting now

Posted by: rich | October 25, 2009 at 02:32 AM

if you are experiencing a "jobless recovery" -- necessarily indicating increasing poverty and dwindling tax receipts -- how long will it take yu to ask yourselves if you are actually experiencing a "recovery" at all, or if you have merely succeeded in jimmying the instruments on a plane flying into the ground so they indicate straight and level flight. Are you guys flying the dashboard or the plane? Both will seem to work until you run out of altitude.

Altitude in this case means the combination of dollar confidence and dollar centrality to the currency regime that make it possible to debase the currency through QE measures and forcing a mispricing of risk through artificially low central bank rates without causing a disorderly revaluation.

Posted by: Byzantine_Ruins | October 26, 2009 at 05:58 AM

So we have learned the obvious. That monetary creation can juice up the S&P 500, but doesn't create solid new industries. It seems that a simple thought experiment would have told us that instead the government does runs experiment with our lives. At least I own a few hundred ounces of silver, I am buying a few more every week just in case. Good Luck!

Posted by: Gabe | October 26, 2009 at 05:42 PM

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