Economy

U.S. faces prospect of more 'jobless recoveries,' economists warn

Experience of last three recessions suggest a grim new era of 'Amerisclerosis' echoing sluggish recoveries of 80s Europe

Are American job-hunters losing their dynamism?
Justin Sullivan/Getty Images

The U.S. looks set to face a future of "jobless recoveries" from economic downturns, as part of growing pattern of chronic unemployment following recessions, a major new study warns.

A day after the Federal Reserve cited the high unemployment rate among its reasons not to reduce its monthly economic stimulus, research presented to the Brookings Panel on Economic Activity Thursday suggested that slow progress on jobs was now part of the post-recession norm.

Noting that the persistence of U.S. unemployment has risen with each of the last three recessions, the authors of the report suggest that future economic downturns “might look more like the Eurosclerosis of the 1980s than traditional V-shaped recoveries of the past.”  

In "Amerisclerosis? The Puzzle of Rising U.S. Unemployment Persistence," Olivier Coibion of the University of Texas and Yuriy Gorodnichenko and Dmitri Koustas at the University of California at Berkeley charted the unemployment lag from recent recessions.

The study looked at data from the last 30 years, focusing on the persistence of joblessness at the regional level, labor mobility and disability claims. 

It found that unemployment figures stagnated for increasingly longer durations over the past three U.S. recessions of 1990, 2001 and 2007.

The pattern increasingly resembles the experience of West European countries in the 1980s, the authors note. In the recession of the early 1980s, both European and U.S. unemployment numbers jumped by about 4 percent. But rapid job growth returned the U.S. to its pre-recessionary status by 1987, whereas in Europe, the unemployment rate fell by just half a percent.

"It looks like we're becoming somewhat more European," explained Justin Wolfers, senior fellow in economic studies at Brookings, in a release accompanying the report.

The authors of the research suggested that "cultural factors" have shifted the way Americans look for jobs, contributing to chronic unemployment following U.S. recessions.

"The extent to which Americans are willing to move across states and across space to find new and better jobs appears to be declining," Wolfers said.

When European unemployment stagnated, particularly in France and Germany, in the 1980s, economists coined the phrase Eurosclerosis to describe the cultural factors that contributed to the continent's sluggish job growth, "in sharp contrast to the apparent dynamism and vitality of American labor markets," the report suggested, adding that the U.S. is now more in line with countries across the Atlantic when it comes to post downturn recovery.

Earlier this month, the U.S. Labor Department announced that unemployment had dropped to a five-year low. But at 7.3 percent it is still off the recent lows of around 4.5 percent recorded in 2007, prior to the onset of the financial crisis.

Furthermore, the drop has been attributed to an unprecedented number of people leaving the workforce, rather than through job creation.

If shifts in the American work ethic of the 1980s provoke more protracted jobless recoveries in the future, "then the nature of fiscal policy responses should be revisited," the authors of the study said in a release.

In the past, the authors say, attempts to inject cash into the economy have failed, "because the long-decision lags involved in the legislative process meant that any positive effects of the stimulus would occur too late."

In era where recessions are no longer short-lived events, however, monetary policymakers and Congress should look at concrete long-term plans to counter the protracted nature of economic recoveries, rather than quick fixes.

"If 'timely, targeted and temporary' remains the mantra of future stimulus measures, then Amerisclerosis may not be so far away," they said.

Al Jazeera and wire services 

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