U.S. Heads For Third Straight Jobless Recovery Economists have begun saying that the recession may have ended this summer. But an expanding economy hasn't led to an expanded number of jobs. Structural changes in the labor market help explain why.

U.S. Heads For Third Straight Jobless Recovery

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Next we're going to talk about what is sometimes described as a jobless recovery. You've heard about this: the stock market is climbing, the job market is not. It can take a long time for jobs to come back after a recession.

NPR's David Kestenbaum, on our Planet Money Team, has been looking at why we get jobless recoveries and whether we're headed for one now.

DAVID KESTENBAUM: A lot of economists will tell you that it looks like the economy may have started growing again over the summer. If so, it's growing without creating a lot of jobs. You can look at the national statistics -unemployment rate 9.8 percent. Or, you can go to this place...

(Soundbite of conversations)

KESTENBAUM: ...a career center in Baltimore, run by the State of Maryland. Everyone here is looking for a job: truck drivers, men and women who used to work in warehouses or the food service industry, or the health care field -like this woman Kia Banks.

Ms. KIA BANKS: I've been looking for a job for an entire year � an entire year.

KESTENBAUM: Do you have like a bagful of resumes and stuff that you carry around with you?

Ms. BANKS: Of course - resumes, cover letters, everything. Cell phone, IDs, Social Security card, birth certificate, all my contacts, all my references, everything that they could ask for, I'm ready.

KESTENBAUM: Kia Banks says she's never had this much trouble finding a job. It's weird, she says, like something's changed. And the idea of a jobless recovery, if that's what's happening, it is kind of weird. How can the economy grow without hiring back some of these people? In fact, for pretty much every recession in modern history, when economic growth, GDP came back, jobs came back a few months later. But then came the recession of 1990-91.

Ms. ERICA GROSHEN (Labor Economist, Federal Reserve Bank of New York): The real question was, well, you know, was some of the data wrong in some way?

(Soundbite of laughter)

KESTENBAUM: This is Erica Groshen, labor economist at the Federal Reserve Bank of New York. The data was not wrong and the unemployment rate continued to rise for a year. It happened again after the recession of 2001, and there's one other example.

Ms. GROSHEN: I actually had our library do a literature search on jobless recovery, and there's a quote from The New York Times in the mid-1930s, which is the first documented use of the term jobless recovery.

KESTENBAUM: Groshen says the reason you don't usually get jobless recoveries is that in typical recessions, employers say, okay, recession's over. Come on back to work - just part of the cycle. In the last two recessions, though, things changed structurally.

Ms. GROSHEN: In the more recent recessions, it seems that we have more of employers using this as an opportunity to change what they are doing in a more basic way. They are closing inefficient facilities. They are culling their workforce. They are changing their production process.

KESTENBAUM: So, businesses became more efficient. That explained the growth. But it meant those workers had to find different jobs, and that takes time. That's your jobless recovery. Lawrence Katz, an economist at Harvard, says it looks like we may be headed for one now, the third in a row. One reason: This recession was so severe, it killed a lot of businesses outright.

Professor LAWRENCE KATZ (Economics, Harvard University): If I just look out the window of my office, I see all sorts of empty storefronts of stores that have been around 20, 25 years, and restaurants that have survived previous recessions. Those stores are completely gone now. Something eventually will move into those buildings, but it's going to take a very solid recovery before people will want to completely start a new business.

KESTENBAUM: The credit crisis isn't helping. If you want to open a new restaurant there, you're probably going to need a loan, and those can be hard to get. Heidi Shierholz, an economist at the Economic Policy Institute, has been keeping two lists: one for good news, one for bad. The bad list is pretty long. The housing crisis makes everyone feel less wealthy, so people aren't spending. States are facing huge holes in their budgets. All that points to slow job growth. The other list, it really only has one thing on it.

Ms. HEIDI SHIERHOLZ (Economist, Economic Policy Institute): There's one bit of good news that pushes against all of that, is we had a massive recession. It was a very deep, steep loss of jobs. So, there is the potential for a very quick bounce back. And the intuition there is that you have a bunch of factories that are just laying idle. So, it doesn't take much investment to just get them back online.

KESTENBAUM: Even if that happens, the country has a lot of ground to make up. The unemployment rate has doubled from where it was before the recession. And the population keeps growing, which means even more people looking for work every month.

David Kestenbaum, NPR News.

INSKEEP: You can read more on our Planet Money series or subscribe to the podcast at npr.org.

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