A Jobless Economic Recovery

A Jobless Economic Recovery?   by David Prekeges

The first decade of this new century is the first decade that we exited with less jobs than when we entered.  That's right, starting 2010 the US had 2 million LESS people employed than at the start of 2000.  The big hurt happened the last two years of the decade, where we lost over 8 million private sector jobs, driving the unemployment rate to double-digits.

I find it interesting that the GDP (Gross Domestic Product - the best measure of the overall product and services output of our country) increased in the third quarter of 2009 by 2.2%.  That was following four consecutive quarters of decline.  Still, for the decade, GDP increased 34% from $9.7T to $13.0T.  A 34% increase, with 2 million less people working!  Clearly, our US workers are more productive exiting the decade as when we entered it.  I believe technology was a major factor in the productivity improvement.

So now that the GDP has turned the corner, and is increasing, by all definitions, the Great Recession (December 2007 through September 2009) is over.  Does this mean we're headed back to full employment anytime soon?  Not even close.

From November 2001 through December 2007, employment grew by a mere 1 million private sector jobs per year.  This growth was 550,000 jobs per year less than the growing number of people in the labor force, putting us at a job deficit when the Great Recession started in December 2007.  That's less than half of the typical expansion periods, where over 2 million jobs were created each year.  This decade of  weak job growth, sandwiched between two recessions (2001 and 2007-9) means we're exiting the decade with 2 million less employed than when we started the decade.  To put this in perspective, in the last two decades of the 1900's, we added over 35 million private sector jobs (19 million in the 90's and 16 million in the 80's).

But the job deficit entering the new decade is really worse than the 2 million lost jobs over the decade.  According to the US Bureau of Labor Statistics, there are 1.3 million people added to labor force each year.  In order to accommodate this growing labor force, we need to add about 1 million private sector jobs per year.  So the real deficit could well be over 10 million jobs as we enter this new decade.

Erasing this deficit will require substantial and sustained employment growth.  But even if we were to add 2 million jobs per year, it would take over 10 years to get back to where we were in December of 2007.  And that length of expansion is not only optimistic, it's more than twice as long as any previous expansion in the US (post-WWII was 58 months).

So will we see the national unemployment number drop down to single digits soon?  Not likely.  With companies being very disciplined in their hiring, and the new, more productive worker churning out more than ever before, new jobs are going to be hard to find.  The key, in my opinion, is this:  "What kind of jobs will we need 10, 20, and 30 years from now?"  That's where we, and the government should be focusing.  Stop trying to stimulate the economy in the short-term.  That's only hurting us in the long-term by adding to the deficit, and creating non-sustainable jobs.  Instead we need to encourage and entice small businesses to form, with their innovative ideas.  We need to employ people in jobs that will create lasting value for the country.  These are the kinds of policies that will ultimately lead us back down the road to full employment.