The latest unemployment numbers reveal the U.S. economy shed 216,000 jobs in August, bringing total joblessness to 9.7 percent. While that’s still a sizable number, the losses are far fewer than earlier this year. Kellogg School faculty think a recovery may be on the horizon.
Employment and unemployment rates are typically lagging indicators of economic health. Lagging unemployment can be particularly disheartening during a recession—the media may herald other indicators as signs of a recovery while many families and individuals wallow in the depths of joblessness, seemingly left out of prosperity. Unfortunately for those without work, experts believe the jobless rate will continue to rise (albeit more slowly still), topping 10 percent before businesses begin hiring en masse.
Unemployment benefits may help prop job seekers during their search, but government assistance may only provide partial support, barely covering the cost of rent, for example. An older paper by Sergio Rebelo, Professor of Finance at the Kellogg School, Joao Gomes of the Wharton School, and Jeremy Greenwood, now at the University of Pennsylvania, modeled the ups and downs of the employment cycle, examining the role of various forms of unemployment insurance in the process. While chiefly theoretical, the paper does emphasize the importance of personal savings to help bridge the employment gap. The extraordinarily low savings rate earlier this decade in the U.S. may for many make current joblessness a more difficult storm to weather.