Less Temporary Workers = More Recalculation

The Cleveland Fed's Murat Tasci published a commentary called "Are Jobless Recoveries the New Norm?" in March 2010. This paper adds some weight to those on the side of structural change in the recalculation debate, the idea that a large part of the reason that the economy is slowing down is because resources are improperly allocated.  If this is true, it means that Keynesian stimulus will be less effective.

Another statistic suggests that some of these unemployed workers will not be able to immediately find work: the fraction of unemployed workers who have been laid off temporarily. Traditionally, some employers lay off workers with an implicit (or explicit) understanding that they will be recalled when the economy improves. Temporary layoffs save both parties from having to spend time and effort searching for a job or a worker when the need for labor increases. Usually, the fraction of the unemployed who are on temporary layoffs jumps at the beginning of recessions. Currently, this measure stands at around 10 percent, but it did not increase much during the recession; if anything, it fell slightly. This implies that fi rms do not perceive the employment adjustment they are going through as temporary or that conditions are such that they are willing to incur costly hiring efforts after the recession.
 
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The low levels of temporary layoffs suggest that the skills of some of these unemployed workers are specific to industries that may end up significantly smaller after the recession.

The more people ignore that there is structural economic change, the worse the policy is going to be.  The simple idea of re-inflating aggregate demand doesn't work to the extent that the recovered economy is going to be different than the pre-crash economy, and the efforts of private companies to capture new fiscal spending or figuring out what the new regulatory structure is going to look like is effort not spent towards actually becoming more productive.