Jobless Recovery

A jobless recovery refers to when an economy bounces back from recession but does so without reducing the unemployment rate with little to no correlation to a country’s gross domestic product (GDP).

For example, when the recession ended in June 2009, the unemployment rate remained above 10 percent and fell by less than one percent by February 2011 — many economists suggested that this period of jobless recovery was worse than the previous two downturns, including the bear market of the 1990s when trillions of dollars in retirement assets evaporated during the technology bust.

One school of thought suggests that technology plays a major role in jobless recovery. Often, once an economy returns to growth, companies are still looking to reduce costs (including labor) or reorganize.

Some companies turn to automation to take the place of workers who lost routine jobs during the recession in industries largely dependent on technology, such as manufacturing, banking, telecommunications and healthcare. So, those jobs are simply eliminated. Or, instead of hiring new workers, they just divvy up hours among existing employers.

This practice stretches to Europe as well. Over the years, Japan and Germany have achieved significant economic growth by automating tasks across a number of industries, reducing a large number of employees.

In order for countries to snap out of a jobless recovery, economists suggest some acts could ease anxiety during a recession and speed up growth. They include lowering interest rates to make borrowing cheaper, increasing the number of people hired by the public sector and upping government spending.

Another reason for slow job recovery points to the extension of unemployment checks by the government during times of economic distress. There's certainly less incentive to look for and take a job when you are receiving regular pay — albeit much less.

An example of a jobless recovery occurred in the early 1990s. While the American recession from the late 1980s technically ended in the first quarter of 1991, the unemployment rate did not actually stabilize until the middle of 1992.