Wednesday, January 9, 2013
You may have heard of the idea of a “jobless recovery,” a recovery in which the economy grows but doesn’t add jobs because of structural problems or because firms are adding robots instead or whatnot. Some hot new research from Laurence Ball, Daniel Leigh, and Prakash Loungani says the problem here is there’s no such thing as a jobless recovery and the classic Okun’s Law link between GDP growth and employment is holding up fine. If recent recoveries haven’t packed much job-creating punch it’s because the recoveries have been unusually slow in terms of GDP growth as well.
I liked that paper because I recently sat through the presentation of an economics paper showing that one leading explanation for jobless recoveries—a reversal of traditional “labor hoarding” behavior patterns—is wrong and based on bad data. It turns out, in other words, that counter-cyclical productivity doesn’t explain jobless recoveries both because productivity isn’t counter-cyclical and because there are no jobless recoveries.
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