In 1960 Arthur Okun postulated an economic formula relating job loss to the decline in output. This formula is no longer working in this recession as the unemployment grows much higher than the actual decline in the output production. An article in the New York Times Magazine written by Roger Lowenstein looks for the reasons – The New Joblessness:
“Explanations for the collapse of the great American job machine begin with the marked absence of what is called labor hoarding. Usually during recessions, firms keep most of their employees on the payroll even as business slows, in effect stockpiling them for better days. In the current downturn, hoarding seems to have gone into reverse. Not only are firms laying off redundant workers, but they seem to be cutting into the bone. Hall says the absence of hoarding means that firms do not expect business to pick up soon. This is supported by other evidence, like a doubling in the number of involuntary part-time workers (there are nine million of them) and the shrinking workweek, now 33 hours — the shortest ever recorded. Presumably, before companies start to rehire laid-off workers, they will ask their current employees to work more.”
And another truth:
“But layoffs are only part of the story. The problem isn’t just that so many workers have received pink slips but also that companies are failing to hire. And this, unfortunately, has been a trend for most of the past decade (unnoticed, perhaps, because the mortgage bubble was papering over latent weaknesses).”
Will this change?
Further reading:“In terms of its impact on society, a dearth of hiring is far more troubling than an excess of layoffs. Job losses have to end sooner or later. Even if they persist (as, say, in the auto industry), the government can intervene. But the government cannot force firms to hire.”