In his comment on Eli Dourado´s “Replies to my critics”, Scott Sumner writes:
The previous two recessions saw small drops in NGDP growth, and slower than normal recoveries. So there’s really no big mystery to explain, except to the extent that productivity behaved abnormally. I’ll accept Berger’s claim that it did, but it really doesn’t explain much, at least in this recession. The unemployment rate is not surprisingly high, it’s surprisingly low given the sub-3% RGDP growth since unemployment peaked at 10%. Indeed it’s not clear why unemployment fell at all. (I’ve had posts called “our job-filled non-recovery.”) And in the 2001 recession unemployment peaked at 6.3%, which probably isn’t much above the natural rate. I wasn’t complaining about tight money in 2001, it’s the recent recession that is the outlier.
Yes, there´s really no big mystery to explain (and ignore productivity behavior). The employment recovery from the 2001 – so called jobless recovery – was the direct outcome of the slow NGDP recovery to trend. But when it did start the voyage back to trend in 2003, employment did well. And I find it interesting that even some market monetarists insist on the idea that monetary policy was “too easy” in 2002-05 (with the FF rate staying “too low for too long”).
Now compare that with what we observe today, based on the same trend line. If we´re back to the “long run”, it is indeed a quasi-quicksand muddy pool!
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