‘Jobless recoveries’ – new concept, the economy ‘recovers’ but the lost jobs don’t come back up again.
In the last three months, the U.S. economy created more than one million jobs and median wages jumped forward—finally. It took five years from the end of the Great Recession for truly robust job and wage growth to take hold. It took so long, in fact, that a new phrase entered the lexicon—“the jobless recovery.”
Henry Siu and Nir Jaimovich may have an answer as to why. In their work presented here, Siu (University of British Columbia) and Jaimovich (Duke University) begin by looking at previous recessions and uncovered a striking pattern. “…Averaged over the three early episodes, employment turns around about four months after the recession; in the recent episodes, the average turnaround time is 21 months.”
In other words, recent recessions, especially the most recent, are not your father’s recessions. Jobs recover very slowly with many people stuck in part time or lower paying jobs. Siu and Jaimovich explain the emergence of this phenomenon by looking at the loss, over time, of “routine” jobs. They argue that “… many of the routine occupations that were once commonplace have begun to disappear, while others have become obsolete. This is because the tasks involved in these occupations, by their nature, are prime candidates to be performed by new technologies.”
By showing the trends in routine and non-routine jobs through a series of recessions, they illustrate a central economic problem of our time. The 21st century economy doesn’t create the sorts of jobs we used to have. Job creation is no longer simply a function of an economy wide recovery, it poses challenges that were not part of earlier recessions. This paper should make policy makers think hard about job creation in the information economy. It is the latest in a series of ahead-of-the-curve, groundbreaking pieces published through Third Way’s NEXT initiative.
NEXT is made up of in-depth, commissioned academic research papers that look at trends that will shape policy over the coming decades. In particular, we are aiming to unpack some of the prevailing assumptions that routinely define, and often constrain, Democratic and progressive economic and social policy debates. In this series we seek to answer the central domestic policy challenge of the 21st century: how to ensure American middle class prosperity and individual success in an era of ever-intensifying globalization and technological upheaval.
It’s the defining question of our time, and one that as a country we’re far from answering. The 21st century economy doesn’t create the sorts of jobs we used to have. Each paper dives into one aspect of middle class prosperity—such as education, retirement, achievement, or the safety net. Our aim is to challenge, and ultimately change, some of the prevailing assumptions that routinely define, and often constrain, Democratic and progressive economic and social policy debates. And by doing that, we’ll be able to help push the conversation towards a new, more modern understanding of America’s middle class challenges—and spur fresh ideas for a new era.
Jonathan Cowan President, Third Way
Dr. Elaine C. Kamarck Resident Scholar, Third Way