America’s New Post-Recession Employment Arithmetic

[Coalition, National Jobs for All]

America’s New Post-Recession Employment Arithmetic By James W. Hughes and Joseph J. Seneca
EXECUTIVE SUMMARY  

❒     The Great 2007–2009 recession is the worst employment setback in the United States since
the Great Depression. In the twenty months from December 2007 (the start of the recession) to
August 2009 (the last month of available data as of this analysis), the nation lost more than 7.0
million private-sector jobs.

❒     The recession followed a very much-below-normal economic expansion (November 2001–December
2007) that was characterized by relatively weak private-sector employment growth of
approximately 1 million jobs per year. This was less than one-half of the job-growth gains of
the two preceding expansions (1982–1990 and 1991–2001), when average annual private-sector
employment grew by 2.4 million jobs per year and 2.2 million jobs per year, respectively.

❒   This underperformance cannot be appreciably attributed to slower labor force growth, i.e.,
workforce shortfalls. In the preceding two expansions combined, private-sector employment
growth per year was approximately 435,000 jobs higher than the annual growth in the number
of people in the labor force. In contrast, in the 2001–2007 expansion, private-sector employment
growth was 550,000 jobs lower than the growth in the number of people in the labor force.

❒   The combination of a weak economic expansion sandwiched between two recessions (2001,
and 2007–2009) produced what will be a lost employment decade. As of August 2009, the
nation had 1.3 million (1,256,000) fewer private-sector jobs than in December 1999. This is the
first time since the Great Depression of the 1930s that America will have an absolute loss of jobs
over the course of a decade.

❒    To put this new millennium experience into perspective, during the final two decades of
the twentieth century, the nation gained a total of 35.5 million private-sector jobs. During the
current decade, America appears destined to lose more than 1.7 million private-sector jobs.

❒   Because of the severity of the 2007–2009 recession employment losses (–7.0 million
private-sector jobs as of August 2009), the United States faces a significant employment
deficit as it confronts the realities of a post-recession future.

❒   Unfortunately, the job deficit is actually larger than the recession employment loss since
long-term, demographically driven labor force growth has continued, even though the pace
of this growth may have been temporarily muted by people discouraged from entering
or returning to the labor force because of the depth and duration of recent job losses.
payroll) employment—simply to accommodate a growing labor force.

❒     The U.S. Bureau of Labor Statistics projects the nation’s labor force to grow by
approximately 1.3 million persons per year between 2006 and 2016. Therefore, the nation
has to add 1.3 million total jobs per year—consisting of private-sector and government
payroll employment as well as contract (non-payroll) employment—simply to accommodate  
a growing labor force. 
 
❒     This 1.3 million annual increase in the labor force means that in terms of private-sector
payroll employment, the nation has to create an estimated 920,000 jobs per year.[2] Adding
this to the actual private-sector job losses accumulated during the 20 months (to date)
of recession equates to an August 2009 employment deficit of 8.6 million jobs. Given
conservative estimates of further employment declines (even if the recession ends in the third
quarter of 2009) and the continued increase in the labor force, the nation’s employment deficit
could approach 9.4 million private-sector jobs by December 2009.
 
❒     Erasing this deficit will require substantial and sustained employment growth. Even if the nation
could add 2.15 million private-sector jobs per year starting in January 2010, it would need to
maintain this pace for more than 7 straight years (7.63 years), or until August 2017, to eliminate
the jobs deficit! [3] This is approximately 50 percent greater than the length of the average post–World
War II expansion (58 months).

❒     Under these reasonable (and possibly even optimistic) conditions, it will take deep into the
second decade of the new century for the labor market of the United States to return to where
it was in December 2007, the start of the Great Recession. This basic post-recession arithmetic
lesson is a very harsh one. 

❒     The extensive economic damage across the country has brought down many of the former
high-flying states, but it has also created an opportunity for New Jersey to become a more
competitive economic player in the future. However, this will require enormous political
will and an intense focus on policies to grow the economy.
Notes: [2]  As detailed in this issue of the Advance & Rutgers Report, the U.S. Bureau of Labor Statistics (BLS) projects that 90 percent
of total job growth in the 2006–2016 period will be payroll jobs.  The authors estimate that 84 percent of these will be in the
private sector and that 5 percent of the labor force growth will be unemployed.

[3] This was the average annual private-sector job growth during the 10-year 1991–2001 national economic expansion, the longest
expansion in the nation’s history.

Read the report: http://www.policy.rutgers.edu/News/A&RR-FINAL_9.30.pdf

Thanks to Prof. Frank Stricker for the reference.
--
National Jobs for All Coalition
http://www.njfac.org