Part of that quote again, from T. Aldrich Finegan:
Only one postwar recovery -- namely, 1954-55 -- was followed by a prolonged period of full employment when the country was not at war. And that period (1955-57) was very unusual in several respects. As table 3 reveals, real GNP rose only 1.5 percent a year -- less than half the average rate for the postwar period (3.7 percent). At the same time, growth in employment (1.2 percent per year) was abnormally high relative to the growth of real output but abnormally low for a full employment period.
1. Growth in employment was abnormally high relative to the growth of real output
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| Graph #1: Real GDP Growth (blue) and Employment Growth (red) |
I'm looking at GDP, not GNP, but there is little difference between the two.
Real
GDP (blue) growth shows a series of high peaks until the mid-1980s.
These occur mostly as the "burst" of growth that follows a recession.
After the mid-1980s, instead of the high peaks we had the "great
moderation".
Employment growth (red) follows the same general pattern, usually at a lower level.
It is easier to compare the red and blue if we subtract the one from the other and just look at the difference. I want to know about "growth in employment" so I'll start with employment growth and subtract the real GDP growth.
What does that give me? Where the red line on Graph
#1 is above the blue, on Graph #2 the line is above the zero level. In
other words, where the line is above zero on #2, employment growth is
faster than Real GDP growth:
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| Graph #2: Employment Growth less Real GDP Growth |
On the first graph, the high points before the mid-80s were high points of growth. On the second graph, we subtracted Real GDP. So the high points on Graph #1 are low points on #2. And the lows of growth -- the recessions -- are high on Graph #2.
The gray vertical bars indicate times of recession. The blue line is high at every one of them, even after the mid-80s. (After the mid-80s the highs are lower, but that's a different matter.)
The blue line is also high between the 1954 and 1958 recessions. This high is not recession-related. Yet it is as high as any of the recession-related high points, except that of the 1974-75 recession.
Between the 1954 and '58 recessions, this
unusual peak runs high for the first three quarters of 1956. As T.
Aldrich Finegan said, just one postwar recovery -- namely, 1954-55 --
was followed by a period when the growth in employment was abnormally
high relative
to the growth of real output.
2. Growth in employment was abnormally low for a full employment period.
Full employment is "defined here as an unemployment rate of 4.5 percent", Finegan says in his 1972 article. In a footnote, he offers some historical context:
Throughout most of the postwar period, economists have typically used 4 percent as the benchmark for full employment. A somewhat higher rate seems appropriate now because a larger proportion of the current labor force consists of young persons (16 to 24 years) and married women, who have much higher unemployment rates than men 25 and over.
Here is a graph from the Monthly Labor Review of January 2018:
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| Graph #3 |
I'm
going to figure that the times of full employment are the times on the
graph where unemployment runs flat -- jiggy but flat -- when it reaches a
bottom. Averages by eye:
- just under 4% in the early 1950s
- around 3% in the mid 1950s
- a little over 4% in the latter 1950s
- between 3 and 4% in the latter 1960s
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| Graph #4: Employment Growth Decline in the Mid-1950s |
Maybe. But it was a decline from a very high peak:
 | |
| Graph #5: That 1955 increase was a big one! |
Just looking at the employment level
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| Graph #6: The Employment Level, 1948-1962 |
I have to say that there was a large, rapid increase in 1955, and a slow increase in 1956 and '57. Growth in employment in 1956-57 was "abnormally low for a full employment period" because the 1955 increase was so big.
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