Is Full Labor Market Recovery Possible?

Will recovery of economy happen without recovery of jobs? Or will labor market become strong again like it did after recessions in 1970s and 1980s? The latest statistic from labor market did not bring completely positive results. As expected, not all the workers that have lost their jobs during recession have found work yet. But it was obvious that some kind of recovery would occur. After all, low housing prices and underwater mortgages were not going to last forever. Our population is getting bigger every day and eventually there will be demand for more houses. And worker productivity remained strong.

Consumer’s reaction to that was that their spending dropped much less than increases of unemployment. The drop in consumer spending in 2008 was quite substantial, more than 4 percent below trend before recession. But by the end of 2009, situation have started to improve and it still continues. Average consumer has not cut spending further, but instead increased spending at higher rate than before recession. Also hours worked have risen more quickly that population over last nine months, what means that labor market may recover, but full recovery of hours worked is not probable.

Moreover, people in United States demand more extensive safety precautions and more government regulation of business activities, as we already have in Europe. Opinions about it may differ, but this kind of safety net eventually reduces hours worked per worker. Consumers obviously agree, because their spending have not reached prerecession standards by now. So it may be that not all jobs will be recreated, but labor market is expected to grow at least as fast as our population will.

Sources:

http://economix.blogs.nytimes.com/2010/07/07/dont-expect-a-full-labor-market-recovery/

http://blogs.wsj.com/economics/2010/03/18/what-will-labor-market-recovery-look-like/

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3 thoughts on “Is Full Labor Market Recovery Possible?

  1. I think it is kind of soon to draw conclusions. Because it was a big crisis and the countries need time to recover. However the question: will the economy recover without the recovery of jobs? I think it might be a retorical question.. And we need people spending money so the demand doesn’t drop. Cause then the productivity won’t drop either.

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  2. I think that with an increasing population the labour market will in time recover to the full extend that it has to. We all know the know the relationship between supply and demand and so I think that if the demand of jobs is there and continually growing then eventually the supply of jobs will increase in order to meet the demand for them. How long this will take I don’t think anyone can actually predict but I think that in the active economies that we all live within, it is of course possible the labour market will recover to meet all our future needs of it.

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  3. In my opinion, it is very soon to be able to assert that labour market is going to recover from this crisis.
    Indeed, the financial policies’ combination of the European States should lead to an improvement of the situation but it will not be sufficient.

    We face an increasing number of job supplies while the offers do not seem to grow so fast. It will thus be necessary to help the reconstruction of the labour market with an employment policy, to maximize the chances of restoring…

    Maybe that the millions of green jobs which will be created before 2020 will solve the problem..

    Reply

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