Job Losses: Not Bottoming Yet

It's probably the last thing anyone wants to hear so soon after news of the gawk-inducing 533,000 lost jobs suffered last month -- but if history is a guide, it's only going to get worse from here.

That's because the majority of job losses in the 11 previous downturns came in the second half of the recession. We're 11 full months into the current one and most forecasters (what else do we have to go by?) think the recession will last through the end of next year.

Let's assume that's somewhere near the truth. Out of all the jobs that were lost during the average recession since 1945, 26 percent of them came in the first half and 74 percent in the second half. There've been 1.9 million jobs lost thus far in the current downturn, so the historical average would mean we could lose another 5.7 million jobs, for a total of 7.6 million by the end. That would be the most jobs lost during a post-Great Depression recession. (If you factor in population, the short 1945 recession, which saw the evaporation of 3.3 million jobs, was worse.)

But there's at least one reason to have some optimism. Job losses in the three most recent recessions, including the 16-month 1981-82 downturn, were more evenly spread out with an average of 42 percent of all lost jobs gone in the first half and 58 percent in the second half.

What happened to cause the more balanced jobs picture?

One likely explanation is the Great Moderation, and now we just have to hope that the GM is not over with the collapse of the securitization market.

Comments

[cyberclark:]

I can tell you a lot about job statistics. When you are unemployed the stat is at 100% !

2008 Dec 06 02:21 PM

[Reinko:]

As far as I know reality, this article comes from Pluto.

How can there be new jobs if the debt is unpaid?

How can you create 2.5 million new jobs when there are no savings at all in the entire economy? From the Federal government, to state and local government and even on the household level; there are no savings.

Who will pay for these jobs?

Again: The above article comes from Pluto...

2008 Dec 06 07:01 PM

[john s. gordon:]

goldes - small business cannot create new jobs while banks are refusing to lend (hoarding cash).
> jack

2008 Dec 06 07:14 PM

[pedroperez:]

Calling this economic cycle a recession is a terrible mistake.

This cycle is our economy passing thru an structural change.

Our economy not only lost almost two millions jobs; worst, it did not created two millions jobs that were the normal figure. So, we have already lost four millions jobs. So, if the new government is going to created 2.5 millions jobs in two years with all the new projects that is less than the normal quantity without any additional help.

2008 Dec 06 08:04 PM

[John Lounsbury:]

Good comments here.

Reinko - "Who will pay for these jobs?" The answer is increased deficit spending. Now, if the increased deficits were created by tax cuts, supply-siders would endorse the action. If the deficits were increased by more government spending, the Keynsians would endorse the action.

The correct action is not going to be determined by ideology. What is needed is a business plan that involves a careful cost/benefit analysis plus careful assessment of possible unintended consequenses. This is so complex that it may too much to expect that a reasonable plan can be formulated. After all, nobody has even been able to properly analyze the debt pyramid that has already been created and is collapsing.

I have been screaming for a balanced federal budget since 2003, but I'll put that on a back burner for now. I never thought I would relent on the deficit issue, but right now a balanced budget and a depression don't sound like a desirable option to me.

Mark Goldes and John S. Gordon - You are on the two horns of the dilema that leads me to the deficit spending prediction in the discussion above.

Maybe the capitalist ideal is to let the weak die and the vultures build a new system. However, how do we know the new system would be any better? Or even as good as what we let die?

I guess I would call myself a pragmatic idealist. I always feel compelled to look for an efficient way to salvage what can be salvaged and build anew what must be replaced. Complexity makes this very difficult, whereas the law of the jungle (economically speaking) is much simpler. There are those who say the economic law of the jungle is efficient. I say only the vultures would agree.

2008 Dec 06 11:50 PM

[Shreedhar.k:]

you must be a genius

2008 Dec 15 10:47 AM