BPEA | Fall 2007

How Much Do We Understand about the Modern Recession?

Robert E. Hall
Robert Hall Headshot
Robert E. Hall Robert and Carole McNeil Joint Hoover Senior Fellow and Professor of Economics - Stanford University

Fall 2007

MODERN RECESSIONS HIT THE U.S. economy in 1990–91 and in 2001. A
modern recession is one occurring in an economy with well-executed monetary
policy and a small fraction of the labor force on the factory floor. I
review the facts about modern recessions and compare them with earlier
recessions, with primary emphasis on the labor market. The facts are perplexing:
employment falls in modern recessions at least as far as in past
recessions, without identifiable driving forces. Economists’ understanding
of the modern causeless recession is at an early stage, but progress has
occurred and the future of this area of research seems promising.