What is a Jobless Recovery

The recession, seemingly, has ended, but do you feel it? Well, the recession may not have actually ended, so suggests the sluggish employment growth. The growth in the labor market is clearly not as many had been hoping for. Jobless growth means just that.

Jobless recovery is an economic state wherein the economy registers a growth in its real GDP. However, there is no significant growth in the rate of employment.

This is perhaps because even as the output and sales of a company increases, it delays hiring new employees. This is understandable as the uncertainty of economic recovery from the recession still prevails. So, a slow increase in employment was expected.

However, creation of new job opportunities and employment has been slower in the US! The end of the previous recession in 1980s noted quick recovery of the rate of employment within the next few months. To justify the jobless growth post the recession in 2009, it may have occurred due to permanent structural change in jobs made by most companies.

Not only did they do away with their employees, the companies absolutely got rid of the need of hiring employees for those job positions again. There is a definite growth in profits but the growth in employment does not correspond with it. There are 13.1 million jobless Americans as in December 2011.

Do not rejoice just yet because this number emerged after 315,000 unemployed people gave up on job search and are now no longer in the quest of employment. However, 120,000 more jobs were also successfully created in the economy within the same period, following a recruitment for 50,000 new job positions by retailers in wake of the holiday sale season.

Presently, an unemployed person will take 33 weeks and contend with 4 other Americans per job opening to find employment, according to statistics. The unemployment levels from 2009 to 2011 seemed to be far above than the pre-recession levels because companies kept firing its employees, especially, towards the end of 2008 during the recession period. In contrast, there has been a very low rate of hiring new employees in the 2 year recovery period in the aftermath of the recession.

Jobless recovery is often observed post recession. However, 2011 is over and the recession supposedly ended years ago. So, why is the employment growth so slow?

Although all economists do not agree on the causes, there are several reasons pinpointed that may be responsible for this phenomenon.

This occurs due to two reasons:

• Improvement in skills of the labor employed through training
• Use of machines to improve the pace of work that takes place in the organization

Automation of tasks has helped economies of Japan and Germany to achieve significant economic growth and increase their GDPs (Gross Domestic Product). In fact, this makes complete sense to the theory of work force resizing leading to a smaller number of employees. The previous ones have probably been replaced with automated systems. Automation has gained popularity in sectors such as manufacturing, banking, telecommunication and medicine.

To reach an economic state pre-recession, 235,120 new jobs need to be created every month. Several economists suggest that increase in government spending, employee recruitment in public sector, especially in the government, reforming the bank system of interest and mortgage rate may ease some anxiety in the economy and initiate a faster pace of economic recovery.