Working Paper: NBER ID: w19587
Authors: Richard B. Freeman
Abstract: The Great Recession tested the ability of the "great U.S. jobs machine" to limit the severity of unemployment in a major economic downturn and to restore full employment quickly afterward. In the crisis the American labor market failed to live up to expectations. The level and duration of unemployment increased substantially in the downturn and the growth of jobs was slow and anemic in the recovery. This article documents these failures and their consequences for workers. The U.S. performance in the Great Recession contravenes conventional views of the virtues of market-driven flexibility compared to institution-driven labor adjustments and the notion that weak labor institutions and greater market flexibility offer the best road to economic success in a modern capitalist economy.
Keywords: No keywords provided
JEL Codes: J0; J01; J08; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| U.S. labor market's flexibility (F66) | job creation (J68) |
| GDP changes (E20) | employment recovery (J68) |
| employment recovery (J68) | job recovery (J68) |
| long-term unemployment (J64) | detrimental effects on workers' skills (F66) |
| employment-output elasticity (E23) | job recovery (J68) |
| U.S. labor market flexibility (F66) | response to economic crisis (H12) |