Back in the day, employment would recover to peak about six months after GDP recovery. But in the past three recessions, something has changed.
In the 1990 recession, employment recovered 15 months after GDP.
In the 2001 recession, employment recovered 39 months after GDP.
In the 2008 recession, it has been 13 months and counting since GDP returned to peak and employment still has not recovered. We updated a McKinsey chart from last summer to show how long this jobless recovery could last. At the current pace, the jobless recovery would last for around 60 months.
McKinsey notes that in old recessions, companies sacrificed productivity and profitability until demand returned, but today they respond by reducing employment. Furthermore:
“Layoffs today are more likely than in the past to be permanent, and many new jobs created in recoveries emerge in different industries and occupations from where jobs were lost. Displaced workers without transferable skills face increasingly lengthy job searches. And because of the ageing of the population, higher rates of home ownership, and the rise of dual-career families, Americans today are much less willing or able to move for a job than they were in the past.”