October 1st, 2011
10:28 AM ET

What's behind America's jobless recovery?

What is the nature of this jobs crisis we're experiencing? Helping to explain it for us is a top expert on jobs. Byron Auguste of McKinsey & Company, the global consulting firm, recently wrote a revealing analysis of the country's employment predicament, looking at the past, present and future. He not only going tells us what's going on, he shows it to us in the video above. The transcript follows:Byron Auguste: Let's go all the way back to the recession of 1948. The U.S. lost jobs in that recession. People were laid off. But within six months of GDP recovering, those jobs were back. And the same pattern held for the next 40 years of recessions and recovery. People were laid off. The economy recovered and they were hired back. And it took about six months for jobs to return to their pre-recession levels after GDP did.

But something changed in the early '90s. And after the recession of 1990 it took 15 months from the time GDP recovered until the time that jobs recovered. More than twice as long.

And we saw that doubling again in the 2001 recession. And in that recovery, it took 39 months for jobs to recover after GDP had already recovered to prerecession levels.

And how are we doing now? Not well at all. In December of 2010, the U.S. economy returned to roughly its prerecession levels of GDP, but current rates of job creation, it will take 60 months - that's five years - to return to our prerecession level of jobs.

So what is the cause of these jobless recoveries in the U.S.? McKinsey's research shows three reasons. Changing employer behavior, mismatches in the labor market and declining entrepreneurship. These are the reasons for our jobless recoveries.

Fareed Zakaria: The jobless recovery that you describe, Byron, is fascinating because it does seem that this all begins, this trend of jobless recoveries, about 20 years ago as you say. And it's about the time that people talk about the rise of the information revolution and the ability of companies to do all kinds of things with technology throughout their supply chain that they were never able to do and the rise of globalization, the ability of companies to hire and source from everywhere in the world.

So it seems like these new forces - technology and globalization - are the kind of underlying shadow that is moving these numbers.

Byron Auguste: Fareed, it's absolutely true that technology and globalization play a major role here. In technology, for example, it's those he workforce management information systems companies have that allow them to reduce their workforce so quickly.

On the other hand, it depends on how you use technology. And when you use technology for innovation that creates jobs. So McKinsey's research suggests that the Internet created 2.6 new jobs for every one job that it destroyed. And in a decade like the 1990s where so much of our productivity growth came from innovation we saw both terrific productivity growth and great job growth.

The problem is in the last decade, it was more efficiency driven and not so much innovation.

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Topics: GPS Show • Jobs • United States

soundoff (13 Responses)
  1. Rz

    Dearest Fareed and Byron,
    Thank you both very much. I'm 100% in agreement with both of you on this one. It's completely accurate and real. However, a few important aspects were conveniently overlooked and that's OK, so let's look at the simple mathematics of the scenario instead. Accordingly, if we continue using the same format, recessions will become more prominent and more prolonged. And the most likely solution to bring us out of these recessions (other than a war of course) is some wonderful technological event that will get people back to work. OK, but eventually (which may even byeven now)

    October 1, 2011 at 11:27 am | Reply
    • Rz

      (sorry, hit the post button by error) anyhow, Eventually, (which could even be now) the frequency and prolonged periods of recession would become intolerable, and technological solutions more scarce. So the whole system is intrinsically destined to failure and will sooner or later require a complete overhaul. So if everything we are discussing here is correct, then the only realistic option for us is to begin planning accordingly.

      October 1, 2011 at 11:41 am | Reply
      • j. von hettlingen

        True, maybe we should change our philosophy! No country can have unlimited growth indefinitely. We have to accept periodical setbacks and treat saturation and stagnation as a normal economic cycle.

        October 2, 2011 at 6:14 am |
  2. MichaelMRW

    The job loss that has occurred was masked by the Mortgage boom during which time many believed that service sector jobs would grow to absorb the slack. A systemic and permanent change has occurred in the corporate formula that controls our prosperity. And the negative impact of exporting American jobs abroad, although known to be taking place, was hidden by a real estate decade built on poor logic and deception that blinded even our best economist and regulators. Now our economy and job market is naked and exposed for all to see. The picture is ugly!

    October 1, 2011 at 3:33 pm | Reply
  3. Corey

    The only reason we have such high unemployment right now is because the government has a monopoly on the education market. If we didn't have public education then teachers would have to compete for their customers by lowering prices and improving quality.
    Get the government out of education. That will solve our unemployment problems.

    October 1, 2011 at 8:05 pm | Reply
  4. Susan Williams

    GREAT article! I've been in favor of HUGE job program for a long time, but who would listen to me? Thanks, Fareed Zakaria

    October 2, 2011 at 2:18 pm | Reply
  5. Varde Burns

    The time for bargaining is ove.r With a congress whose only agenda is to defeat our President, there is no ability to bargain. It is time for President Obama to override congress using an executive order to address the economic emergency and create an EMERGENCY JOBS ACT. Skilled union workers should not be under cut because they are skilled and non- skilled workers could be paid less. Ikea pays their workers in Sweden $19 per hr and $8 per hr here! This is wrong and not paying a living wage will inhibit people's ability to spend. We need to pay people enough so they feel they can also spend. Without jobs and the ability to spend we will never recover! In an economy where everything costs so much compared to wages getting paid a higher wage will only promote spending which will increase revenues and pay down the deficit!

    October 2, 2011 at 5:19 pm | Reply
  6. JP

    If the rate of job creation after a major recession continues to double, then after the next two recessions it could take the U.S. roughly twenty years to regain jobs lost during a recession. Scary. Political and social unrest could become common.

    October 30, 2011 at 2:27 pm | Reply
  7. Peter Ross

    In your transcript you have ""In technology, for example, it's those he workforce management information systems companies have that allow them to reduce their workforce so quickly..." Please tell me the correct sentence...

    January 12, 2012 at 12:33 am | Reply

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