Although the recession officially ended in June 2009, unemployment rates are decreasing slowly, the average length of unemployment remains at a historical high, and the unemployment rate is projected to remain above 7.8% until 2013. The concern is that we are again facing a jobless recovery, with economic activity growing, while the unemployment rate remains high. The prior two recessions, in 1990-91 and 2001, were also considered jobless recoveries, with the unemployment rate continuing to increase 15 months after the end of the recessions. However, the most recent recession has even more persistent and unusually high unemployment. What is causing this jobless recovery?
Many researchers consider a labor market mismatch as a significant cause for the persistently high unemployment. One study of employment opportunities over the past three decades found that employment growth has polarized into relatively high -skill, high-wage jobs and low-skill, low-wage jobs, while middle-skill routine jobs have declined. Some middle-skill jobs have been replaced by technology while others have been outsourced overseas. During the most recent recession, employment in middle-skill and middle-wage jobs declined 7-17% (Source: The Regional Economist, April 2011).
Another study found that job opportunities have significantly reallocated between industries. During the recent recession, employment in the construction industry declined 20% and 6% in the financial industry. Between June 2009 and December 2010, employment dropped an additional 7% in the construction industry and 2% in the financial industry. Manufacturing and information service industries were also severely impacted (Source: The Regional Economist, April 2011).
During the recent recession, small firms lost proportionally more jobs than larger firms. Small firms accounted for approximately 10% of total net job loss despite their 5.3% employment share. They also take longer than large firms to rehire.