Short-Term Recession = Long-Term Jobs Problem

Over the past few weeks, the nation's economic pundits have gone from saying that the U.S. likely would avoid a recession to saying that that the U.S. likely will enter a recession to saying that the U.S. likely is in a recession but that it will be a brief one. Overlooked is the fact that even a short recession can have long-lasting effects on the labor market.

A new study prepared by the Center for Economic and Policy Research argues that a recession's negative impacts on employment, wages, incomes and poverty will last much longer than the recession itself. Based on an analysis of past downturns, the study's authors estimate that a mild recession will last between six and nine months with the labor market impacts reverberating until 2010.

The authors further forecast that a mild recession will raise the national unemployment rate, reduce the share of people with jobs, drive down family incomes, increase the number of poor households and further reduce the share of the population with health insurance coverage.  

Those patterns are consistent with national and state-level developments that  unfolded following the last three recessions (1980-82, 1900-91 and 2001). After the 2001 downturn, for instance, it took until 2006 for private-sector employment in North Carolina to return to its pre-recessionary level. And during that same period, according to the NC Budget & Tax Center , the share of Tar Heels with jobs fell while wages and incomes stagnated.