I used to argue that the whole idea of a jobless recovery was a myth. We weren’t getting many jobs because the recovery wasn’t occurring. Growth was close to trend, so you wouldn’t expect a fall in the unemployment rate.
Now things are beginning to enter the Twilight Zone. Last November the unemployment rate was 9.8%. Now it’s 8.6%, a pretty big drop for one year. Yet according to Okun’s Law the unemployment rate should have risen significantly. Even if you adjust trend growth down from 3.0% to 2.5%, unemployment should have risen, as the four quarter growth in RGDP from 2010:4 to 2011:4 will almost certainly be under 2%.
Explanations? Bad RGDP numbers plus bad unemployment rate numbers plus TGS plus people exiting the workforce. That should just about cover it.
Update: Marcus Nunes has an excellent post with graphs that show the employment picture from a number of angles.