The Job-Filled Non-Recovery

I used to argue that the whole idea of a jobless recovery was a myth.  We weren’t getting many jobs because the recovery wasn’t occurring.  Growth was close to trend, so you wouldn’t expect a fall in the unemployment rate.

Now things are beginning to enter the Twilight Zone.  Last November the unemployment rate was 9.8%.  Now it’s 8.6%, a pretty big drop for one year.  Yet according to Okun’s Law the unemployment rate should have risen significantly.  Even if you adjust trend growth down from 3.0% to 2.5%, unemployment should have risen, as the four quarter growth in RGDP from 2010:4 to 2011:4 will almost certainly be under 2%.

Explanations?  Bad RGDP numbers plus bad unemployment rate numbers plus TGS plus people exiting the workforce.  That should just about cover it.

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About Scott Sumner 492 Articles

Affiliation: Bentley University

Scott Sumner has taught economics at Bentley University for the past 27 years.

He earned a BA in economics at Wisconsin and a PhD at University of Chicago.

Professor Sumner's current research topics include monetary policy targets and the Great Depression. His areas of interest are macroeconomics, monetary theory and policy, and history of economic thought.

Professor Sumner has published articles in the Journal of Political Economy, the Journal of Money, Credit and Banking, and the Bulletin of Economic Research.

Visit: TheMoneyIllusion

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