Nick Rowe notes that Spain and Ireland also have seen unusually high productivity, and hence high unemployment, relative to output during this recession.

Here’s my guess. It’s because all three countries had a big fall in construction. But what’s so special about construction? My guess: construction workers have general human capital, not firm-specific human capital. Labour hoarding is what causes productivity to fall in a recession. And labour hoarding only makes sense when workers have firm-specific human capital.

The trouble is, declines in housing construction are characteristic of most U.S. post-war recessions, but many of those were associated with low productivity growth. My first thought is a different story, based on the difference between an inventory recession and a Recalculation.

An inventory recession means that you suddenly find yourself with too many cars on the lot (too many houses unsold, as well, which in turn means too many refrigerators, too many washing machines, etc.) This is typical of most U.S. recessions in through the 1970’s. The workers you lay off are the workers who are making stuff, because you need to suspend making stuff in order to work off the excess inventories. You keep your overhead workers, and output per worker goes down.

The most recent two recessions–the Dotcom crash and the securitization crash–were not inventory recessions (we had a housing inventory recession in 2006-2007, but the really big overall economic hit came later). Think of them as financial shocks or recalculations. As a CEO, you worry about your firm surviving, so you focus on the balance sheet. You lay off your overhead workers in order to conserve cash. You try to restructure your organization. Output per worker goes up.