Vice President and Senior Regional Officer
The Federal Reserve Bank of Cleveland
While the Great Recession was more severe than any downturn since the Great Depression of the 1930s, the recovery has been stronger and more sustained than is generally recognized.
That was the rosy message delivered by the Federal Reserve's Guhan Venkatu to a January 12th event at the Union Club, a joint effort between OVA and the Harvard Business School Club of Northeastern Ohio.
"We have fairly strong employment growth for this point in a business cycle. One way to think about the robustness of the current recovery is the string of monthly job gains over the course of the current cycle. It's actually the longest on record. We've seen 75 months of continuous job growth. That's quite a bit longer than any other recovery in recent decades," said Venkatu, who oversees the Pittsburgh branch of the Cleveland Fed.
"The scale of job losses in the Great Recession just dwarfs anything we saw in previous business cycles in the post-war period. It was very, very severe," he said. On the other hand, job gains since then have been stronger than in the previous recovery, though weaker than in the periods following the previous two recessions, in the 1980s and 1990s.
He took issue with the popular notion that too many of the new jobs created in recent years are low-paying. "We've actually seen fairly good job gains among higher-paying sectors," with about 60% of new jobs in those higher-paying sectors.
The economy has almost reached full employment, he noted, with the number of new unemployment claims having fallen below 300,000 for 96 months, or the longest streak since 1970s. "This is another indication that the labor market is pretty strong. People at the bottom of the wage rates are starting to see wage gains that are sticking."
In addition, the voluntary separation rate, or what's known as the "quit rate," is as high as it's been in years. "It's an indication of the confidence that people have to get good jobs, that they're willing to leave their current job to seek better offers elsewhere," he noted.
At the same time, average hourly wage gains for fulltime employees have been stronger during this recovery than in the past, he said. "That's in part a function of the low inflation environment we've been facing."
But he went on to say that none of this positive news should be interpreted to minimize the continuing problems. The average current spell of unemployment is about half a year, which is historically quite high. "There are health consequences to this too," he said. Studies show that in the year following job displacement, the likelihood of an unemployed person's death doubles. Also, black unemployment is approximately double that for white Americans.
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