Economists Olivier Coibion, Yuriy Gorodnichenko and Dmitri Koustas analyse the three most recent U.S. recessions, noting that the unemployment rate has stayed high for longer and longer through time.
The trend is reminiscent of 1980s Western European recessions dubbed “Eurosclerosis,” leading the authors to ask if the United States is fighting its own bout of “Amerisclerosis.” In lay terms, we might call Amerisclerosis the “jobless recovery.”
The authors discuss how contractionary policies after the ends of recessions as well as shifting American attitudes toward work could have led to persistent unemployment.
Ultimately, policymakers and economists need to rethink fiscal and monetary policy so we can prevent static labour markets after recessions, the authors conclude.
“If future U.S. downturns are to be more long-lived than pre-1990 recessions, then the nature of fiscal policy responses should likely be revisited,” they write. “If ‘timely, targeted and temporary’ remains the mantra of future stimulus measures, then Amerisclerosis may not be so far away.”
In the chart below, you can the vast difference in employment between pre and post-1990 recessions.
Economist Justin Wolfers explains the paper well:
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