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I'm also curious how Yglesias would explain the lack of "slack" in the labor market after the recession of '01-'02. A milder recession to be sure (though you wo

I'm also curious how Yglesias would explain the lack of "slack" in the labor market after the recession of '01-'02. A milder recession to be sure (though you wouldn't know it from the political rhetoric at the time), but one that nonetheless hit employment hard. Within three years net employment was back where it had previously been, and the unemployment rate was back down in the 4%'s. There hadn't been massive spending; most of the deficit increase was lowered taxes and lowered revenue.

dragonwriter 13y ago
> I'm also curious how Yglesias would explain the lack of "slack" in the labor market after the recession of '01-'02. I'm not sure how Yglesias would, but to me the answer is obvious. The 2001 recession (official dates are still, IIRC, March-November 2001, though there was, around 2004, talk that the start date maybe should have been pinned somewhat earlier, I don't think it was ever actually revised), was, as you note, much shorter and, in part because there was a lot more access to credit, which supported a quick rebound of aggregate demand and a return to expansion and better top-line employment numbers (a number of factors, include tax policy changes which shifted the distribution of gains upwards, made it a fairly hollow expansion in which the bottom three quintiles all saw income declines and the next quintile was flat, however, which, help set the stage for a deeper recession with a much slower recovery when the bottom fell out of the housing market, since it was a lot harder for demand to rebound.)