13.3% unemployment rate

That one surprised me, as indeed it did most other economists.  What should I learn from this episode?  After all, labor market adjustment was relatively slow coming out of the 2008 crisis.

My tentative hypothesis is that “matching” is more important than I had thought (and I already thought it was quite important, relative to other macro commentators).  One feature of the current layoffs and rehirings is that the ties between workers and firms apparently were not so severed in the first place.  For most sectors (cruise ships aside, etc.), no “rematches” were required, and so rehirings were accomplished very quickly.  As demand (partially) returned, employers wanted at least some of the old workers back, and workers wanted their old employers back, and then it happened.  “Figuring out where I belong” did not slow down the process very much.

That is good news for the remainder of the recovery, provided the recovery happens soon, and it is at least one factor (not necessarily decisive, of course) militating in favor of a speedier reopening.  “Reopen before the worker-employer ties are lost!”

It also implies that during regular, non-pandemic downturns a lot of the slowness of labor market recovery has to do with matching rather than demand per se, noting that the two interact.  And that is a sign of a more general pessimism for the future, since demand problems are easier to fix through policy than matching problems are.

Another possible implication of the new numbers is that employers realized that “F*** it, I want to get back out there” is the prevalent consumer and also worker attitude, whereas Twitter-bound intellectuals were slower to see the same.


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