Economists predict slow economic recovery

The paper finds that in most cases, as job creation remains a central focus of the economic recovery, the jobless rate takes a protracted amount of time to recover. 

“The stark difference between the pre- and post-crisis experience raises the question as to whether the unemployment rate ever returns to its pre-crisis level,” the Reinharts said. 

In 10 of the 15 cases they examined, unemployment never dropped back down to its pre-crisis level during the 10 years afterward. 

“There is little good news to be found in the result that income growth tends to slow and unemployment remains elevated for a very long time after a severe shock,” the authors wrote. 

They also found in past crises that policymakers made mistakes in trying to improve the situation, and that “political leaders sometimes grasp for quick fixes that impair, not improve, the situation.”

They cited four of the five countries that were part of the 1997-1998 Asian crisis that haven’t seen the jobless rate return to pre-crisis levels.

In 1992, Japan’s unemployment rate hit a low of 2.1 percent before the stock market and housing sector collapsed. Since then, the rate hasn’t gotten lower than 3.8 percent. 

They also found gross domestic product also is affected in the 10 years afterward, trending 1 percent slower. 

The analysis was compiled during the past decade by Carmen Reinhart, a University of Maryland economist and Kenneth Rogoff of Harvard. Reinhart wrote the paper with her husband, a scholar at the American Enterprise Institute.