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.