What is Growth Recession?

Growth recession is a recent term that describes circumstances in an economy where job growth is notably poor or continuing to fail while other aspects of the economy like Gross Domestic Product (GDP) are actually improving. Many credit the late Dr. Solomon Fabricant with developing this term. It gained more popular usage in the late 1990s and early 2000s in the US, as several small recessions rebounded with increases in GDP that exceeded job increase or that reflected poor employment outlook.

An economy can grow slowly, but if it is rebounding from a recession it has to grow enough that new jobs are constantly being provided. These can make up for jobs lost during the recession. In some cases, not enough growth occurs, so that from an economic standpoint, the Gross Domestic Product is recovering and increasing, but not at a pace that makes businesses feel comfortable restoring jobs or hiring new workers. This can also be called a jobless recovery.

In the worst circumstances, the growth recession leads to an environment where jobs are still being lost while the GDP expands. This means more individuals are financially affected. In order for the GDP to continue expanding, other ways in which the economy is developing must make up for the lack of consumer spending and investing that occurs due to lost jobs. There are different ways in which the GDP can grow without these consumers, including through things like government investment in industries. It’s expected that government investment should raise confidence and create jobs, but this isn’t always the case and job growth may stagnate or recede.

Those directly affected by growth recession face tough economic times and the amount of suffering they may encounter may be directly tied to public awareness of poor or receding job growth. Sometimes, poor job outlook is masked by reports that the GDP is improving. Alternately, hearing reports that the economy is recovering but joblessness is increasing confuses the average person. Evidence of growth recession in US history suggests that a recovering economy and joblessness are not mutually exclusive and may occur under a variety of circumstances.

To prevent growth recession — and it's not clear that it’s always preventable — growth in the GDP must be encouraged. As long as it is slow or slight, new jobs don’t always get created and businesses remain concerned about increasing their spending levels. How to quickly encourage GDP growth is a topic highly debatable among economists. Some believe that markets are always cyclical and likely to experience recessions and depressions. Provided these are recovered from quickly they may not cause continued loss of jobs, but if recovery is slow, a higher percentage of people lose jobs and cannot find new work.