The Trend is Bad Too

Matt O’Brien in The Atlantic raises concerns about hysteresis—the idea that being unemployed for long periods of time can make you permanently unemployable—by linking to the graph following his paragraph. The concern is that making a large section of the workforce permanently unemployable lowers the capacity for the entire economy for a very long time—that’s part of the reason why countries do so badly after a financial crisis. However, I’d suggest his graph actually hides part of the problem.

This graph focuses attention on the post-crisis quagmire we find ourselves in. However, the big leap in duration of unemployment hides a worrying trend. Let’s take out that part of the data and focus on the trend pre-crisis:

As you can see, going from peak to peak, unemployed workers in the middle of the aughts could expect to stay that way nearly two months longer than unemployed workers in the fifties—which implies that there were serious problems that probably need addressing besides whatever therapy is needed to get us back to trend GDP and employment growth.