During recessions in the 1970s and 1980s, increases in the rate that workers were moving into unemployment and decreases in the rate that workers were moving out of unemployment were nearly equivalent. In other words, during these recessions, employees were getting fired and were unable to find new jobs because employers were not hiring. This caused large spikes in the overall unemployment rate. However, once the economy turned around, the inflow and outflow rates returned to normal levels, bringing the overall unemployment rate down very quickly.

But during the 1991 and 2001 recessions, unemployment rates spiked up primarily due to lack of hiring, not due to massive layoffs. As the economy started to recover, employers were slow to hire, creating jobless recoveries.

During the current recession, the labor markets are again more typical of recessions in the 1970s and 1980s, with high levels of firing and low levels of hiring. That makes it much more difficult for unemployed workers to find jobs, increasing the length of time people remain unemployed.

To try to determine how much hiring employers will do once the economy starts to recover, a couple of other indicators can be reviewed. During recessions, the number of temporary layoffs and the number of involuntary part-time workers typically increases. However, during this recession, there are more permanent, rather than temporary, layoffs, meaning that employers do not intend to rehire these employees in the near future. For instance, between July 1981 and November 1982, the percentage of unemployed workers on temporary layoffs increased from 16.1% to 20.7%. From December 2007 to April 2009, the percentage declined from 12.8% to 11.9% (Source: FRBSF Economic Letter, June 5, 2009).

The number of employees who are working part-time involuntarily is at historical highs, increasing from 3.0% in December 2007 to 5.8% in April 2009 (Source: FRBSF Economic Letter, June 5, 2009). This increase has occurred in a broad range of industries in a wide range of occupations. Many see this as a sign that once the economy recovers, employers will just move employees from part-time to full-time status, without the need to hire more employees.

While no one knows for sure what will happen in the future, all of these factors imply that even when the economy starts to recover, unemployment rates may stay at high levels for some time to come.