The New Normal?

WHY SO MANY AMERICANS REMAIN UNEMPLOYED

Despite the paralysis in Washington, D.C., there is a consensus that job creation is a prime policy objective. A new analysis of American employment from the McKinsey Global Institute, the nonprofit research arm of the big consultancy firm, sheds welcome light on a murky subject.

The current “jobless recovery” is a new phenomenon in post–World War II history, an ugly hallmark of the 2000s. A common recovery index is the number of months it takes for total employment to return to its prerecession peak.

In all postwar recoveries until the 1990s, the trough-to-peak employment recovery took about six months. With the anemic growth after the early-2000s recession, however, it took thirty-nine months to reach prerecession employment levels. And at the current “recovery” growth rate—a near-recessionary 1.4 percent or so—it will take a full five years to claw back the jobs lost in the 2008 crash.

What has changed according to the McKinsey analysts is the behavior of employers. Until the 1970s, employers responded to a 1 percent recessionary fall in GDP with job cuts equivalent to about a third of 1 percent of GDP, while the rest came from “productivity losses”—that is, lower profits. Since then, employers have been shifting more and more of the burden of a recession to their workers. In the recent crash, labor bore essentially all of the costs of the downturn.

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About the Author

Charles R. Morris, a Commonweal columnist, is the author of The Two Trillion Dollar Meltdown (Public Affairs), among other books, and is a fellow at the Century Foundation.