Justin Fox revisits the January payrolls report, and finds some scary numbers most of us missed the first time around:
January 2009 was a truly, spectacularly bad month for non-farm payrolls. It was bad enough in seasonally adjusted terms: 741,000 jobs lost. But when you look at the raw data it is truly staggering: 3.6 million jobs gone. There’s always a big decline in employment in January as all those Christmas-season jobs disappear—that’s why the Bureau of Labor Statistics adjusts the data for seasonal factors. But in normal times it’s a decline of 1 million jobs or so. This January accounts for about three-quarters of the total job loss since the fall financial panic.
I find it hard to believe that any economy which managed to shed more than three and a half million jobs in one month is anywhere near recovery. Most of the time, job losses are a lagging indicator. But they’re also, when they approach this kind of magnitude, an important driver of economic activity: people who have just been laid off simply don’t spend money. And a marginal extra 3.6 million people not spending money amounts to a pretty unstoppable force in exactly the wrong direction. If each of those people reduces spending by $1,500 a month, then that’s $65 billion a year right there being sucked from the economy. And that’s just the job losses from January this year.
What’s worse is that you have to get quite a long way into a recovery before businesses feel so upbeat that they start hiring again. New job creation is an incredibly powerful force, but it’s also something which works over the long term, not the short term. In the short term, mass layoffs have a much larger effect. And they’re not over yet.