The latest data on employment in the United States confirm that the American economy continues to recover from the Great Recession of 2008-2009, despite the slowdown engulfing the other G-20 nations. Indeed, the pace of private-sector job growth has actually been much stronger during this recovery than during the recovery from the 2001 recession, and is comparable to the recovery from the 1990-1991 recession.
During the last 31 months, private-sector employment has increased by 5.2 million and the unemployment rate has now fallen below 8% for the first time in nearly four years. But the unemployment rate is still more than two percentage points above the long-run value that most economists view as normal when the economy is operating near its potential.
Moreover, the number of long-term unemployed (27 weeks or longer) is about 40% of the total – thelowest share since 2009, but still far higher than in the previous recessions since the Great Depression, and about double what it would be in a normal labor market. So the US labor market, while healing, is still far from where it should be.
That is partly because the job losses during the Great Recessionwere so large – twice as large as those of previous recessions since the Great Depression. In terms of US economic history, what is abnormal is not the pace of private-sector job growth since the 2008-2009 recession ended, but rather the length and depth of the recession itself.
The downturn was a distinctive balance-sheet recession that caused sizeable declines in household wealth and necessitated painful deleveraging. Consistent with recoveries from such recessions, demand has grown slowly, despite unprecedented fiscal and monetary stimulus, and that explains why the unemployment rate remains high. Indeed, businesses cite uncertainty about the strength of demand, not uncertainty about regulation or taxation, as the main factor holding back job creation…