Economists have known for a long time that there is a cyclical asymmetry in the unemployment rate. In a recession, the unemployment rate tends to spike up quickly and sharply. During an economic expansion, the unemployment rate tends to decline only gradually. Consider the following data, for example:
The shaded regions roughly depict the periods over which the unemployment fell from peak to trough. As you can see, what the U.S. is experiencing right now looks a lot like what Canada experienced in the early 1990s. Evidently, it takes time to rebuild the employment stock after a shock. And the bigger the shock, the longer it seems to take. Is this a puzzle? Not if you believe we've experienced a Humpty Dumpty moment; but it is if you believe in Deflated Balloons; see here.
Yah...see that protracted decline in the Canadian unemployment rate from 1992 to 2008? That was because of deficient demand. Demand was clearly deficient for almost 20 years. Shoulda increased G more, I guess.
Yah...see that protracted decline in the Canadian unemployment rate from 1992 to 2008? That was because of deficient demand. Demand was clearly deficient for almost 20 years. Shoulda increased G more, I guess.
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