Early last month, the Business Cycle Dating Committee of the National Bureau of Economic Research determined that the economic expansion, which began in June 2009, lasted 128 months and was the longest in the history of U.S. business cycles, dating back to 1854. The previous record of 120 months was held by the economic expansion of the 1990s.
Due to the pandemic, the U.S. economy was forced into its 12th recession since the end of World War II. The official unemployment rate rose from 3.5% in February to 14.7% in April, a more rapid rise to a higher level than during any of the previous 11 recessions of the last 75 years. While the double-dip recession of the early 1980s and the Great Recession of 2007-09 led to substantial job losses, the speed and severity of job loss in the early stages of our present recession were markedly worse. The total number of jobs dropped from 151 million in March to 130 million in April—a drop of almost 14% in one month.
An important question about the current recession is whether we will see a relatively quick, V-shaped rebound of employment or a slower, U-shaped recovery such as we experienced following the last three recessions of 1990-91, 2001 and 2007-09. One interesting statistic provided by the U.S. Bureau of Labor Statistics—the share of “job losers on layoff”—offers some hope that employers may be prepared to rehire as soon as the economic recovery takes hold. Since a layoff typically involves a temporary interruption of employment rather than contract termination, rehiring is usually faster and less costly.
The percentage of job losers on layoff during recessions in the 1970s and 1980s rose considerably during the downturns (typically doubling from about 10% to 20%) and then fell sharply after the trough of the recession as jobs returned quickly. However, during the recessions of 1990-91, 2001 and 2007-09, there was very little rise in the share of job losers on layoff, followed by a very slow return of jobs—hence these three recessions experienced what has been referred to as “jobless recoveries.” In other words, during these recessions, the chance that unemployed workers were merely laid off with a reasonable prospect of being rehired dropped substantially.
However, the situation is noticeably different with the current “forced” recession, as the share of job losers on layoff jumped from about 13% in February to almost 80% in April. This implies that large numbers of the unemployed could conceivably be rehired quickly, although there is no guarantee. If large numbers of workers are not rehired, then the recovery would be measurably slowed.
The pace of recovery from the current recession is dependent not only on economic policy, but also on health policy and the path of the coronavirus itself. We are focused on continued progress in the search for a vaccine that can be produced and distributed widely in a timely fashion.