Behavior of labor market following Great Recession not unusual, say Cleveland Fed researchers
What’s been unusual about the recovery from the Great Recession is not the behavior of the labor market, but rather, the anemic growth of GDP, say Cleveland Fed researchers
One of 11 recessions since the late 1940s, the Great Recession stands out in terms of its severity and the sluggishness of the recovery that followed. Looking for causes of the “jobless recovery,” some analysts suggested that the fundamental relationship between the labor market and the rest of the aggregate economy has changed. But Federal Reserve Bank of Cleveland researchers Murat Tasci and Caitlin Treanor say the labor market’s behavior has not been that unusual, particularly in the recovery phase. The real problem, say the researchers, is that output growth in the current recovery, like most recent recoveries, has been particularly anemic.
The Great Recession saw GDP fall by 4.2 percent and employment contract by 5 percent. While these numbers are extraordinary in magnitude, the researchers say they are generally in line with the relationship between GDP and employment during previous recessions. “While the Great Recession saw a larger employment loss and a larger unemployment rise than would have been predicted by the decline in GDP, the recovery has seen improvement in these (labor market) indicators that is completely in line with historical patterns. The question is not why or how the link between labor markets and output has changed, but why growth after recessions has become so feeble compared to that of earlier times,” say Tasci and Treanor.
The researchers say this weakness does not seem to be an artifact of how severe the preceding recession was. They note, for example, that the overall decline in GDP, peak to trough, was 0.3 percent in 2001 and 4.2 percent in 2008–2009, but both episodes were followed by anemic recoveries: GDP grew 2.3 percent and 2.7 percent, respectively, within the first year.
Read: Labor Market Behavior during and after the Great Recession: Has It Been Unusual?
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Federal Reserve Bank of Cleveland
The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.
The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.
Doug Campbell, email@example.com, 513.455.4479