Economists are realizing that each successive recession and recovery takes longer to regain the employment level before the contraction.

The depth of the recession may have something to do with this and the perception of the recession may also have an effect.  The more severe the beginning of the recession the more stunned and reluctant businesses may be to regain confidence in hiring.

Political uncertainty may delay recovery. Radical legislation as we now face has left many businesses shocked and uncertain what the rules of the game are.  This administration’s intrusion into bankruptcy law (GM and Chrysler) , contract law (mortgage cramdowns) and legal recovery (BP) leaves businesses reluctant to operate under conditions more like that of a third world country than the economic powerhouse that used to be America.

But the more likely explanation is the combination of a higher minimum wage and more generous and extended unemployment benefits. It is economic common sense that higher minimum wages will negatively impact employment but the impact is muted when enacted during a growing economy with low unemployment. The effect is amplified in a recession where radical new laws like the health care bill or the attempt at a card check bill makes any new employee a serious liability.

This is not to accuse everyone drawing unemployment of preferring it, but I have never had an employee ASK me to lay him off if it becomes necessary to reduce workforce…. until this recession.

Drawing unemployment for two years reduces the incentive to seek work, and a higher minimum wage reduces the incentive to hire.  It is a combination that will keep our unemployment levels high for some time to come.