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The Lasting Effects of the Great Recession

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The Lasting Effects of the Great Recession

Six Million Missing Workers and a New Economic Normal

The Hamilton Project,

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The metric for measuring US unemployment overlooks some six million people.

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Recommendation

The Federal Reserve monitors the US jobless rate to gauge economic recovery, but that measure fails to account for the “six million missing workers” who have dropped out of the US workforce as a result of the recession. Ignoring this discrepancy implies “settling for a new normal.” Economists Michael Greenstone and Adam Looney have coined an innovative, provocative metric to calculate recovery that they call the “jobs gap”; alas, the US might not fill the gap until 2021. getAbstract recommends the thesis to all US economy-watchers.

Summary

Years after the Great Recession officially ended, America has not yet achieved a full economic recovery. The unemployment rate has fallen month by month since August 2012, but millions are still jobless, while the proportion of working Americans relative to the population as a whole has remained constant at about 58.6%. The Federal Reserve has promised to re-evaluate its interest rate policy when the unemployment rate drops to 6.5%. The US economy will reach that milestone by the end of 2014 if it creates jobs at 169,000 per month – the pace it achieved in August 2013. However, using the jobless rate...

About the Authors

Michael Greenstone is a professor of environmental economics at MIT. Adam Looney is a senior economics fellow at the Brookings Institution.

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