A Powerless Recovery
Paul Krugman notes that persistent unemployment hurts the employed as well by decreasing their bargaining power, citing the low (voluntary) quit rate as evidence. This is an interesting claim with compelling evidence – wages grow a lot faster for everyone when unemployment is low. But there’s something peculiar about the the recent recovery – it’s relatively powerless. Let me explain. Both the early and late 2000s recessions have been followed by so called “jobless recoveries” where output rises a lot quicker than employment. One would expect that this would be correlated with slower increase in bargaining power (using quit rate as a proxy) though there is no way to be sure, the JOLTS dataset we use to measure these things only goes as far back as the turn of the century.
But one would at least guess that a recovery in power would be in line with a…
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