The recent bounty of words, terms and names entering – or on occasion, reentering – the lexicon of mainstream America has been one of the more intriguing consequences of the financial crisis and economic downturn. Previously, society had generally relegated them to the domain of economics and finance. I mean, when was the last time one overheard on the street, or even heard of at all, sub-prime loans, moral hazard, shadow banking, depression or Keynes.
We can probably include more to that ever-burgeoning list, such as jobless recoveries and Lady Gaga. I did a bit of research and found that Google searches for Lady Gaga are up by about 100 percent over the last 12 months compared to the previous twelve, while searches on jobless recovery, or recoveries, are up by more than 500 percent over that same time period. After further research, I am still not sure what a “Lady Gaga” is, but to put it in an economics perspective, as we economists assume when modeling consumer behavior, tastes are subjective.
You might recall only one week after it was announced that the economy had grown at a robust rate of 3.5 percent in the quarter ending September 2009, the official rate of unemployment rose above the, as The Wall Street Journal put it, “grim milestone” of 10 percent, for the first time since mid 1983. Thus, if indeed we are in the midst of a recovery, similar to those of the early 90s and 2000s, it appears it will be a jobless one. So, what exactly is meant by the term jobless recovery? Perhaps it sounds a bit oxymoronic?
Well, you see, back in the “good old days,” economic recoveries and improvements in the employment picture typically went hand in hand. Well, like Dorothy once said to Toto, “We’re not in Kansas anymore.” And though job growth did resume one year after the Bush 41 and two years after the Bush 43 recessions, this time around we are likely to be looking at disturbingly high unemployment rates for a good deal longer.
Productivity is a measure of how much output firms get per unit of labor. Recent productivity gains have allowed businesses to squeeze ever more goods and services out of already existing workers. A recent study by Atlanta Fed Economist Melinda Pitts showed firms with less than 50 employees account for 33 percent of net job gains in an economic recovery and 45 percent of jobs lost in this recession. Highly dependent on bank lending to cover everyday operating expenses, small businesses are getting severely squeezed by the credit crunch. Finally, the average workweek is at a record low of 33 hours, meaning on average at least seven hours are left. And think about it, after having to cut loose workers due to the recession, businesses will likely delay hiring until the recovery proves to be more than a false start. The recalcitrance of businesses to offer jobs will surely result in an adverse feedback loop, which adds up to a sluggish and jobless recovery.
Still, to try to end on a bit of an up note, for those of you out of a job and with rather grim prospects at the present moment, if all else fails, you can always try your luck at becoming a pop star. If Lady Gaga can do it, so can you.
