The Expert: A Jobless Recovery
- Dec 23, 2008
With the recession expected to wind down in the second half of 2009, attention will turn to the strength of the recovery, which will play a key role in how quickly demand for office space will reignite. A jobless recovery is the period following a recession when the nation’s gross domestic product is expanding but the labor market is stagnant or shrinking. The term was first used to describe the period following the 1990-1991 recession. In earlier cycles, the labor market began to grow again simultaneously with or shortly after the end of the recession. But in recent cycles, employers have figured out how to grow output without restaffing right away. They have been able to do this by improving worker productivity via new technology or by hiring in cheaper offshore locations. The restructuring of the economy away from unionized manufacturing jobs and toward services has contributed to the trend, as well.A logical way to measure a jobless recovery is to use nonfarm payroll employment at the end of the recession as a benchmark. The period between the end of the recession and the month when employment finally rises above that level could be designated a jobless recovery. Using that definition, the jobless recovery lasted 14 months after the 1990-1991 recession. That recession ended in March 1991, and during that month payroll employment totaled 108,535,000. But the labor market continued to languish, and payroll employment did not rise above that level until May 1992, when employment totaled 108,580,000.In November of that year, the weak labor market remained on the minds of voters who rejected a second term for President George H.W. Bush and elected Bill Clinton. The jobless recovery following the 2001 recession lasted even longer at 29 months. That recession ended in November 2001, but employment did not rise above its end-of-recession level until April 2004. The office market did not mount a vigorous recovery until 2004. On the heels of negative absorption in 2001 and 2002, the market absorbed an anemic 6 million square feet in 2003 but did not return to robust growth until 2004, with absorption of 52 million square feet.The current recession will most likely be followed by a jobless recovery, suggesting that the office market will have to cope with sluggish conditions into 2010.