What Hysteresis Looks Like

A blog about business and economics.
May 19 2012 10:48 AM

What Hysteresis Looks Like

When cyclical unemployment is allowed to fester long enough, the economy's potential level of "full employment" declines. This is called "hysteresis" but I don't think people understand it very well. This Bloomberg piece strikes me as typical of a lot of recent press treatment:

After looking for work since May 2009, Raquel Barron, 40, hears the same thing when she interviews: We don’t want to hire someone who’s been jobless for so long. “They still put me at the bottom of the list when I tell them I’ve been unemployed for three years,” said Barron, who moved into her parents’ home in El Sobrante, California, after losing her administrative job at a construction company. “Every single day, I go on Craigslist to look at their listings. But I feel like my chances are only getting worse.”

Discrimination and quasi-discrimination against the long-term unemployed is a real thing. But I think the real bite of hysteresis is in some ways more banal. Imagine a guy with a small business that involves a few people driving stuff around in trucks. When the downturn first strikes, he cuts his workers hours. When it lingers on, he lays some workers off. If the economy bounced back at this point, all he needs to do is rehire a worker. But if the downturn lingers long enough one of the trucks will break. If the truck doesn't get repaired (and why should it be) then the economy's ability to re-employ a new truck driver is  impaired. If the downturn has gone on so longer that the guy who knows how to fix trucks has left town for North Dakota, then we're even more impaired.

Or this could work on other kinds of factors of production. Many people can't work more hours unless they can make day care arrangements for their kids. But if a regional economy's been operating at a depressed level for a long time, some of the day care centers are going to close which becomes a new hurdle to re-employment for the day care center's previous clients.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



The End of Pregnancy

And the inevitable rise of the artificial womb.

Doctor Tests Positive for Ebola in New York City

How a Company You’ve Never Heard of Took Control of the Entire Porn Industry

The Hot New Strategy for Desperate Democrats

Blame China for everything.

The Questions That Michael Brown’s Autopsies Can’t Answer


Kiev Used to Be an Easygoing Place

Now it’s descending into madness.


Don’t Just Sit There

How to be more productive during your commute.

There Has Never Been a Comic Book Character Like John Constantine

Which Came First, the Word Chicken or the Word Egg?

  News & Politics
The Slate Quiz
Oct. 24 2014 12:10 AM Play the Slate News Quiz With Jeopardy! superchampion Ken Jennings.
Oct. 23 2014 5:53 PM Amazon Investors Suddenly Bearish on Losing Money
Oct. 23 2014 5:08 PM Why Is an Obscure 1968 Documentary in the Opening Credits of Transparent?
  Double X
The XX Factor
Oct. 23 2014 11:33 AM Watch Little Princesses Curse for the Feminist Cause
  Slate Plus
Oct. 23 2014 11:28 AM Slate’s Working Podcast: Episode 2 Transcript Read what David Plotz asked Dr. Meri Kolbrener about her workday.
Brow Beat
Oct. 23 2014 6:55 PM A Goodfellas Actor Sued The Simpsons for Stealing His Likeness. Does He Have a Case?
Oct. 23 2014 11:47 PM Don’t Just Sit There How to be more productive during your commute.
  Health & Science
Oct. 23 2014 5:42 PM Seriously, Evolution: WTF? Why I love the most awkward, absurd, hacked-together species.
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.