You will see references like this one to our economy making a "jobless recovery." If you've wondered why this is so, or if it is unusual, let me explain what is going on.
Non-salary expenses make up a large percentage of each full-time worker's employment cost. These include, but are not limited to, health care expenses, retirement contributions, vacation and sick leave. Some estimates suggest these expenses are as large as 40-50% of salary cost, or a third of the total cost of employing a full-time employee.
When a firm first starts to experience a need for additional employee hours worked, normally as a result of increased orders when a recovery happens, it is cheaper to put existing workers on overtime than to hire additional workers. While overtime normally means paying out 150% of hourly wage, it typically does not carry with it additional benefit costs. And, existing workers already know how to do the job, and incur no costs for recruitment, selection, and training. Another route taken by such firms is to hire temporary or part-time workers.
Therefore, firms keep piling on overtime until their full-time workers begin to rebel in one way or another. This rebellion may consist of declining morale and productivity, increased sick leave, or increased turnover. Eventually, firms experiencing increased orders will have to hire new full-time workers, but it is typically a last resort.
If you've wondered why the talking heads tend to favor infrastructure and construction projects as job creators, it is because these are industries where many workers are hired on an "as needed" basis and laid off between projects. Beginning new projects takes workers off the unemployment rolls quickly. As such it rapidly improves the unemployment statistics reported in the media and this helps the politicians. Such projects aren't very helpful to individuals whose job skills are not in the construction trades.
So...is a "jobless recovery" normal? Absolutely. Employment is a lagging indicator of the economic cycle. If anything other than a jobless recovery should happen, be surprised.
