Nicked from AEP.
So, can you identify the point on that chart where US eligibility for unemployment benefits was raised from 26 weeks to 99 weeks?
Another interesting bit:
A new twist is an apparent decline in the \”employment intensity of growth\” as rebounding output requires fewer extra workers. As such, it may be hard to re-absorb those laid off even if recovery gathers pace.
This is also called \”rising productivity\” and while it does cause problems in the short term, as above, is generally considered to be a good thing.
Now, stepping well off my reservation of actually knowing anything and moving to the realms of speculation, this is one of the few things about today which can be directly compared to the 1930s. For the 30s saw one of the biggest advances in labour productivity ever. High growth rates (8% for the US in 35, 36 for example) didn\’t lead to the expected falls in unemployment. Some, yes, but not as much as would have been expected.
And to some extent at least (and I find it curious that real economists tend not to really discuss this) a part of (I would argue a goodly part of but as I\’ve already said, I\’m in the realms of speculation here, not knowledge) that lovely high post war growth was caused by those productivity increases in the 30s. For what increased productivity means is that if, as and when, the economy returns to full employment then the production frontier has been expanded.
If we can get more out of each labourer\’s labour (which is just another way of saying increased productivity of labour) then when we\’re using all the labour production will be higher (which is just another way of saying increased GDP).
So, if it is true that there is a declining \”employment intensity of growth\” then we might be expecting a huge global boom sometime in the 2020s. Hopefully we won\’t need a World War between now and then.
At a deeper level, what might be causing this rising productivity? Well, there are those who point to the 30s as the time of two huge changes. The final death of large scale employment in agriculture as it was mechanised plus the effect of electricity and the production line (Ford might have been the first in 1913, but it takes time to flow throughout industry) on manufacturing.
Today? The likely culprit is digitisation and the internet.
And yes, there is a policy implication here. If productivity is rising swiftly, and as a result we\’re going through a large sectoral shift in employment, then whacking up aggregate demand to get everybody back to what they were doing three years ago doesn\’t in fact help matters. It\’s even possible that we\’d be better off doing absolutely nothing and allowing the \”recalculation\” to get on with itself.
But I agree, this is speculation, not an ex cathedra pronouncement from an expert.