Labor markets grew only fitfully
The unemployment rate remained high in 2011, and payrolls were still well below prerecession levels. See the chart. With unemployment persistently high, it was hard to argue that the country's economy performed well. Several dynamics appear to have shaped the labor market in 2011 and contributed to the slow progress in bringing down the rate of unemployment. But the dominant factor continued to be the relatively slow pace of the expansion of economic activity.
- EconSouth, "Southeast Struggles to Recover"
- EconSouth Now podcast, "Surveying the National Economy"
- REIN Data Digests, for individual state economic analyses
- SouthPoint, "Employment data point to continued regional recovery"
- SouthPoint, "Revised data paint brighter employment picture in the Southeast"
- BLS's Economy at a Glance, for Southeast job data
For the most part, the same fundamental force—weak expansion of economic activity—continued to restrain job growth nationally and regionally as in 2010. Real gross domestic product (GDP), the broadest measure of economic performance, increased in 2011, but not by much. GDP expanded at a modest 1.7 percent pace. This kind of subpar growth was consistent with the research by economists Carmen Reinhart and Kenneth Rogoff, who have documented that recessions associated with debt-related financial crises are typically followed by below-normal recoveries. These economists identified a pattern in which the process of deleveraging, or paying down debt, restrains the overall demand for goods and services. That deleveraging process can take several years to complete.
Some analysts have argued that, in addition to the slow pace of growth in GDP, certain labor market impediments may also have contributed to the relatively slow employment recovery. Anecdotally, mismatches between the skills that job seekers possess and the skills that employers need were frequently cited as an example of such impediments.
The general consensus among Atlanta Fed economists was that skills mismatch accounted for some of the slowness but was not a primary cause of high unemployment. See the video. Shortages of workers with certain skills and in certain industries have always existed, and this problem did not appear to be more widespread in 2011 than it was before the recession. In 2011, 32 percent of businesses reporting in a National Federation of Independent Business survey indicated they had few or no qualified applicants for job openings. This figure is significantly lower than the 43 percent that responded this way in 2007.
A slow rebound in employment after a recession is not a new phenomenon. The recoveries from the past three recessions have all been described as jobless recoveries. This consistency suggests that there may be longer-term structural changes in the economy that influenced labor market performance after the end of the last recession.
Specifically, job destruction in all of the past three recessions were heavily concentrated in jobs that required completing fairly repetitive tasks following a defined set of procedures. These included certain assembly-line tasks in manufacturing, as well as many clerical and retail-sales-related jobs. Likewise, during the postrecession expansions of the 1990s and the early 2000s, employment growth in routine-type jobs lagged growth in nonroutine occupations that were less easily automated.
The last recession was by far the most severe, but this pattern seems to have played out again against this more troubled backdrop. In 2011, total employment in occupations involving routine tasks was essentially flat, while employment in nonroutine occupations increased by almost 2 percent. Reports from Atlanta Fed business contacts suggested that firms in 2011 continued to invest in technology that boosted efficiency, which in turn lessened demand for workers to do some routine tasks.
To sum up, improvement in labor market conditions in 2011 was apparently constrained by a combination of forces. Of these, slow growth in GDP remained a primary constraint holding back improvement in the labor market. Skill shortages were a factor, but not a dominant one, while broad shifts in the demand for certain types of jobs and tasks may also have played a role.