Well that has not happened for a lot of this recession and explanations of why that is the case are far from complete.
The article below, by Stephanie Flanders of the BBC, looks at some of the issues. It could be because so many of the new jobs, over half a million more than two years ago, are part time. It might be because those who have chosen self-employment over unemployment are actually 'self-unemployed' having no significant work to do.
Two explanations Flanders does not mention are:
1. The effect of mobile European workers - if they go home when there are no jobs this stops unemployment rising as each job is lost. This only explains the low rise in total unemployment.
2. Real wage rates have fallen, allowing firms to employ more people.
The second explanation is simply markets working as they should in a microeconomic sense. When there is a surplus of a product then price falls. This encourages higher demand, but lower supply and the market clears.
Pigou and other leading economists explained that this is what would happen at the start of the Great Depression and that this would lead to unemployment falling and output recovering. Of course the 1930 recession continued into the Great Depression and Keynes explained this by saying wages were 'sticky downwards' and the market adjustment didn't happen.
The supply-side reforms to the labour market and the draconian approach to public sector pay since 2009 have allowed real wages to drift down. Firms can now afford to take on workers with lower productivity and so employment could rise with a lower rise in real GDP associated with it.
There are multiple factors at play here, but I'd like to think that Pigou got this one right.
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