James Pethokoukis

Politics and policy from inside Washington

Why U.S. labor markets may stay in a funk

Mar 22, 2010 18:16 UTC

“The Labor Market in the Great Recession” is an interesting new paper that looks at where the job market may be heading, as well as how it has fared the past few years. The latter points first:

Unemployment rose from a pre-recession minimum of 4.4 percent to reach 10.1 percent in October 2009. This increase—5.7 percentage points—is the largest postwar upswing in the unemployment rate. It dwarfs the rise in joblessness in the two most recent recessions in 1990 and 2001, when in each case unemployment rose by approximately 2.5 percentage points. It dominates even the severe recession of 1973/4 (4.25 percentage points) as well as the combined effects of the double recession of the early 1980s (5 percentage points). There is little doubt that the present downturn is the deepest postwar recession from the perspective of the labor market.

But will the deep downturn be followed by a rapid rise? Don’t count on it, the authors say:

The resemblance of these trends to the similar breakdown in match efficiency that accompanied the European unemployment problem of the 1980s raises the concern of persistent unemployment, or hysteresis, in U.S. unemployment going forward. We consider a range of possible sources that might lead to hysteresis, including sectoral mismatch, extension of unemployment insurance (UI) benefits, duration dependence in unemployment outflow rates, and persistence in unemployment brought about by reductions in the rate of worker flows, what Blanchard (2000) has termed sclerosis.

Recent data point to two warning signs going forward. First, the historic decline in unemployment outflow rates has been accompanied by a record rise in long-term unemployment. We show that this is likely to result in a persistent residue of long-term unemployed workers with relatively weak search effectiveness, depressing the strength of the recovery. Second, conventional estimates of the impact of UI duration on the length of unemployment spells suggest that the extension of Emergency Unemployment Compensation starting in June 2008 is likely to have led to a modest increase in long-term unemployment in the recession. Nonetheless, we conclude that, despite these adverse forces, they have not yet reached a magnitude that would augur a European-style hysteresis problem in the U.S. economy in the long run.


Jimmy was picked on when he was in school. That is why he is such an angry dork.

Posted by Jimmy the Greek | Report as abusive

15 healthcare winners and losers, in a phrase

Mar 22, 2010 16:43 UTC

1. Obama the Democrat. Achievement of 50-year Dem goal means no 2012 nomination challenge. W

2. Obama the Centrist. Not with an all-Dem bill that has upside-down approval ratings.L

3. Big Pharma. No Canadian drugs, plus they get more generic biotech protection. W

4. Big Insurance. Loads of new regulations plus wimpy mandate that means new customers might not show. L

5. Treasury holders. Tax hikes and spending cuts for coverage expansion rather than Medicare solvency. L

6. 2010 GOP. Loss ensures motivated base for midterms. W

7.Supreme Court. May have to decide constitutionality of politically explosive individual mandate. L

8. Rep. Paul Ryan. Confrontation with Obama cranks up profile. W

9. Majority Leader Steny Hoyer.Speaker Nancy Pelosi not going anywhere, even if a big November loss. L

10. Mitt Romney. Anger over Obamacare could seep into RomneyCare. L

11. Mitt Romney. Expertise in healthcare could boost him in 2012. W

12. Investors. Overall, cap gains taxrates are rising 60 percent. L

13. Government workers. Uncle Sam is going to lots need more to administer this. W

14. Federalism. Top-down health mandate that some states may not be able to afford. L

15. China. More pressure to enhance its own safety net to boost consumption. W (for US, at least)


Romney is toast and rightfully so. Passage of Massacare shows abysmally bad judgment. Let’s go for better candidates.

Posted by Pat Duggan | Report as abusive