Why does it take so long? This isn't one of those West European scenarios where, due to benefits, being unemployed is permanently somewhat attractive alternative for some subset of the work force. Nor is the United States a country where employers cannot fire recalcitrant workers.
I once joked that we were not going to get below 7 percent unemployment before January of 2013, when President Palin takes office. It now appears that the trajectory is even slower.
I continue to take an optimistic view. My guess is that at some point we will see employment expanding rapidly, at a pace of 400,000 jobs a month or more. I think that this will start to happen before the end of President Obama's first term, not that he will deserve credit for it.
But part of me worries that the the much-vaunted flexibility of the U.S. labor market is a thing of the past. Robert Fogel tells us that the three long-term superior goods are leisure, health care, and education. Obviously, an increase in leisure does not increase employment, although it certainly creates opportunities in complementary goods and services.
But health care and education in the U.S. are arguably the most cartelized labor markets in the world. How many entrepreneurial ideas in those fields are rendered implausible by credentialing issues? If you want your innovative school to draw customers, you have to get accredited--not to mention dealing with the fact that your competition gets public funds and you do not. Your innovative health care delivery process will run afoul of medical license and practice laws.
We probably could be retraining lots of unemployed workers to serve the education and health care industries in productive ways. But the credentials bottleneck is very restrictive.