The Anatomy of Slow Recovery

What America needs now is not just a recovery in demand, but also structural adjustment. Unfortunately, the market cannot produce a demand recovery rapidly by itself, and it cannot produce structural adjustment at all until a demand recovery is well under way.

BERKELEY – Between 1950 and 1990 – the days of old-fashioned inflation-fighting downturns engineered by the United States Federal Reserve – America’s post-recession unemployment rate would fall on average 32.4% over the course of a year from its initial value toward its natural rate. If the US unemployment rate had started to follow such a path after peaking in the second half of 2009, it would now stand at 8.3%, rather than 8.9%.