Academic journal article Monthly Labor Review

Productivity and Business Cycles

Academic journal article Monthly Labor Review

Productivity and Business Cycles

Article excerpt

An often-noted common feature of the business cycle recoveries of 1991 and 2001 has been relatively slow employment growth in the early years of the upturn. In the July/August issue of the Federal Reserve Bank of St. Louis Review, Kathryn Koenders and Richard Rogerson examine this phenomenon from the perspective of organizational dynamics. Their article, "Organizational Dynamics Over the Business Cycle: A View on Jobless Recoveries," starts by noting that the two most recent recoveries share another, less-frequently noted, common feature: both followed the recession that ended an unusually long expansion.

Using that feature as a starting point, Koenders and Rogerson developed a model by which the dynamics of reorganizing production to eliminate unneeded labor could be the link between the speed of net job growth during recovery and the duration of the previous expansion. In their model, labor utilization inefficiencies emerge over time, but the effort to reorganize might be postponed during a long period of expansion. "Because," say Koenders and Rogerson, "reorganization leads to the shedding of unnecessary labor and takes time, this gives rise to an extended period in which the economy sheds labor, thereby delaying the date at which aggregate employment begins to increase during the recovery."

One very useful aspect of Koenders and Rogerson's research is an extension of the long-expansion-delayed-employment-growth observation beyond the past two business cycles. …

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