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By Philippe Legrain ADD COMMENTS

During Britain’s early-1980s recession, a 4.7% loss in output caused employment to fall by 2.4%.

In the early 1990s recession, a 2.5% loss in output led to a 3.4%  fall in the number of people in work.

In the recent recession, output plunged by 6.2% but employment fell by only 1.9%.

So whereas in the early 1990s, a 1% fall in output led to a 1.4% fall in employment, in this recession produced a decline of only 0.3%.

To put it another way, if the labour market had responded now as it did in the early 1990s, employment would have fallen by 8.4%, not 1.9%.

Why have relatively few jobs been destroyed?

During the early 1990s recession, hours fell 1.9% but earnings per hour grew 7.3%. Since then, employees and employers have learnt to be more flexible. In the latest recession, hours per job fell 2.2% – and wages were frozen.

Of course, other factors have played a part. And unemployment may rise further if Britain’s recovery flags and as the public sector trims jobs.

But for now, amid all the gloom, it’s good news.

Hat tip: FT

Posted 11 Apr 2010 in Blog

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