Wednesday, January 6, 2010

US Reduces Work Without Losing Much GDP

Copyright, The New York Times Company

Last week I explained how United States employment fell by a greater percentage than did its inflation-adjusted spending and output (gross domestic product, or G.D.P.). The pattern was not the same for other countries.

The Organization for Economic Cooperation and Development has constructed indexes of employment and inflation-adjusted G.D.P. that are designed to be comparable across countries. I have calculated percentage changes in each country’s employment index and in its real G.D.P. index from the fourth quarter of 2007 until the third quarter of 2009 (at least, for those countries for which these numbers are available). Each percentage change is displayed in the chart.

Of the nine recession countries with data available, the United States is the only one with inflation-adjusted G.D.P. falling less than employment.

Moreover, the United States has the biggest loss of jobs of the nine and the smallest real G.D.P. decline.

The countries with greater G.D.P. drops tend to have smaller employment index declines (or even increases), and vice-versa.

More research is needed to determine what the country comparisons tell us about the causes of the recessions and various government efforts to alleviate them. But it is interesting to consider whether, if we had the choice, we’d like the recession to be one with a large G.D.P. drop or a large employment drop.

If it were up to me, I’d rather maintain my income without maintaining my employment, rather than maintaining my employment without maintaining my income. Thus, it could have been worse — as it was in at least eight other developed countries.

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