America’s jobs nightmare – A UK view

There is an intriguing contrast between the US and UK economies. British GDP remains substantially smaller than it was at its peak but employment has bounced back, helped by lower real wages and a growth in part-time jobs. The US economy has more than caught up all of its lost output and is now bigger than it ever was – but its labour market is in a much worse state than ours.

The horrible reality in the US is that there are still 4.2m fewer jobs than there were in December 2007 and that employment remains 3.1 per cent lower than it was before the recession began 58 months ago.

As Rea S. Hederman, Jr and James Sherk of the Heritage Foundation point out, this is the first recession in the post-war era when employment hasn’t recovered within four years of the recession’s onset. Employment – as measured by non-farm payrolls – was up by 2 per cent at the same stage after the 2001 recession, four years and 10 months after its start; it had bounced back 6.7 per cent at the same stage after the recession of 1990-91; 8.3 per cent after that of 1981-82; 9 per cent after that of 1960-61; 10.4 per cent after that of 1970; and had exploded by an astonishing 12.5 per cent at the same stage after the 1973 recession. The current US recovery has turned into a jobs disaster – one that closely resembles the GDP nightmare currently plaguing the UK. It is vital that both countries seek to learn from one another: the US has been better at writing off bad debt, including that of banks, allowing house prices to crash and liquidating bad investments; the UK workforce seems to have behaved more flexibly…

Choosen excerpts by JMM from

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