Another Jobless Recovery, Part 2

Click here to read Part 1.

CalculatedRisk.com produces graphs that the eyes can see. They also make it easier to make my case for another Jobless Recovery. Poster LiBob said Jobless Recovery is a popular oxymoron in an economy which is based on consumption. Another individual explained the economists' use of the phrase Jobless Recovery was similar to Hawaii Pidgin English. If you're from the Midwest you might just say it's BS (not the degree). I'll ask my readers to forgive me, for using the official economic buzz phrase "Jobless Recovery". Now to the point.

The graph below shows the unemployment rate and the year over year change in employment alone with eight recessions in blue.

Nonfarm payrolls decreased by 263,000 in September. The economy has lost almost 5.8 million jobs over the last year, and 7.2 million jobs during the 21 consecutive months of job losses. We have 15.1 million people unemployed.

The unemployment rate stands at 9.8 percent. This is the highest unemployment rate in 26 years.

Now for more visual proof of the great new (positive spin) American Jobless Recovery. First examine how fast unemployment dropped at the end of every pre-1991 recession.

Now see how in 1991 and 2002 the rate continued higher for about 12-16 months after the last two recessions were officially declared to be over.

So, why can't it be different this time? Well, it could, but let's examine the magnitude of this recession to the 2001 recession and ask why should it be different this time. Did we reverse roles with China?

We have lost 7.2 million jobs during the 21 consecutive months of job losses. By comparison, we lost a total of 1.6 million jobs in the 1990-1991 recession, before the economy began turning around and jobs began increasing, and we lost a total of 2.7 million jobs in the 2001 recession, before the economy began turning around and jobs began increasing.

We have already lost more than double the jobs we lost back in 2001-2002.

Guess what? In 2001-2002 the housing boom was still helping to employ lots of people which we do not have today. So, we're already in a hole twice as deep (halfway to China) as the last recession with no housing boom help us climb out of it.

The second graph below shows the job losses from the start of the employment recession, in percentage of workforce terms (as opposed to the 7.2 million number of jobs lost) and the number of months it took following the recession to return to the same level of jobs that preceded the recession.

For the current recession, employment peaked in December 2007, and the current recession is now the worst recession since WWII in percentage terms, and second worst in terms of the unemployment rate (only the early '80s recession was worse).

The economy is still losing jobs at about a 3.2 million annual rate, and the unemployment rate will most likely hit 10% soon. Aside from declining new claims which is a positive leading indicator, most economists feel the short term momentum will push total unemployment to 10%.

A lesson brought home by the chart is how weak the recovery from the 2001 recession was. One could say it was half the size of the current one, but it took four years for employment just to return to its February 2001 peak.

Once again the eye can see that even the worst post-WWII 1948 and the third worst percentage loss 1958 recession both had a V shape snap back to break-even in less then one year of the official recession end. Now why did they have such a fast snap-back when our milder recent 2001 recession took four years? Yes, we had a lot more manufacturing jobs then and when American consumers increased their spending to buy more washers and dryers , lawn mowers, home furnishings , shoes and clothing a much larger percentage of those goods was made in America. And, laid off American labor got their "recall" notice to come back to work. Today when we increase our consumer spending, people in China get called back to work.

Thinking it's different this time?

Try naming two prominent economists who are predicting a robust job recovery snap-back like we had in 1948, 1958, 1974 or 1981. Search Google and try finding two articles predicting a robust job recall coming soon.

Even Democrats and Republicans agree it will be a Jobless Recovery. President Barack Obama warned on Monday that more job losses should be expected in the months ahead despite recent signs of economic recovery. Republican John Boehner said at best we will have a jobless recovery.

I hope I'm wrong and we have a robust job recovery like the 40's through the 80's.

Comments

[Tom E.:]

Business has crafted a labor surplus in the US economy. This will make the US a less attractive destination for talented immigrants and will undermine support for capitalism among the average American.

Its is one thing to see the rich getting richer while your situation is also improving - the rising tide that lifts all ships. However, when only the yachts are rising and everyone else is going down the sink hole, voters are going to want change a system that is seen as being rigged against them.

Nov 03 10:26 AM

[User 353732:]

There is a real recovery and then there is a statistical recovery.

In a real recovery ordinary Americans get jobs, increase real after tax discretionary income, see their net worth become larger, get better access to credit to finance both small business expansion and start ups , face the future with more confidence and actually increase their material quality of life.
In USA 2009 there is no real recovery.

In a statistical recovery, the top 5 % prosper (and the top 1 % prosper mightily), the next 60 % continue to compress along every metric while the bottom 35% stagnate, heavily subsidized by increasingly unjust transfer payments from the compressing 60%.

Through the sorcery of Big Govt bookkeeping and economic accounting, there is a declared recovery. A statistical recovery is both an intellectual and a moral fraud.

Without jobs there can be no real growth; only an expansion in financial deceit, economic delusion and accounting deception.
When the unemployment and underemployment rate is this high, credit access for real people this bad, and real estate distress so extensive and unrelieved, there can be no recovery because there are no engines of real growth.

Nov 03 11:38 AM

[Angel Martin:]

from the article:

"Even Democrats and Republicans agree it will be a Jobless Recovery. President Barack Obama warned on Monday that more job losses should be expected in the months ahead despite recent signs of economic recovery. Republican John Boehner said at best we will have a jobless recovery."

If all the idiot politicians agree on something, I suspect the exact opposite will happen.

Nov 03 12:13 PM

[ryanclarke:]

There is not a chance to have "jobs growth" without "new industry." Railroads replaced ships in the 1870s ... cars replaced railroads in the 1930s ... computer replaced people in the 1970s ... and now how will the computers run when energy costs get out of hand due to the Feds inflation at all cost policy? If any jobs do come back ... briefly ... they will be the same type of low paying ... time consuming ... a waste of gasoline driving to work ... j**ka*s jobs that got the U.S. into the situation it currently suffers.

Nov 03 01:30 PM

[a fat panda:]

The flaw in all of this thinking is that Recovery is defined in current sales where as New Jobs are created based on future sales.

Most of the stimulus has gone to dead industries with massive excess capacity. So while sales are rising, it is sales of existing inventory that was mispriced for the market. There is no point hiring in these industries when you have months if not years of inventory sitting on the shelf. What puzzles me is why anyone expects anything but a jobless recovery.

Nov 03 02:10 PM

[401KMAN:]

Ryanclarke posted:
There is not a chance to have "jobs growth" without "new industry." Railroads replaced ships in the 1870s ... etc.

We did have a huge new industry - software and high tech but the companies had to bring in cheap labor the last couple of years. That killed a lot of middleclass jobs. You have highly skilled people working at retail jobs.

Nov 03 03:07 PM

[Al-USA:]

"
What puzzles me is why anyone expects anything but a jobless recovery.
"

Well, the masses still believe that capitalism works for them. In fact, there might still be a rapidly decreasing majority that believe that capitalism is the "best" economic model out there to secure a job, feed/clothe their families, and, in general advance civilization...

The past "jobless" recoveries, but especially the current one, will, in my opinion, sooner rather than later, change the class consciousness of the masses, even despite the massive propaganda machine of the Financial Oligarchy.

When that happens, Capitalism will be under its greatest threat since the 1930's Depression. So today's capitalists should be grateful that the masses still entertain the notion of actually being able to secure a job, feed/clothe their families, and see an advancement of civilization, as they have known it under the economic model of capitalism...

Nov 03 03:17 PM

[JAMES CARLINI:]

Without jobs, the consumers who are the backbone of the GDP (70%?) are not going to be spending their way out of this recession. So who is? Stimulus programs?

Who is going to pull the rabbit out of the hat? First, they have to buy a hat - and a rabbit.

Nov 03 03:36 PM

[W.E. Heasley:]

Excellent Article.

The Atlanta Fed says the Real Unemployment Rate is north of 16%.

With the Spruce Goose of all Stimulus Plans, based on Political-Political rather than Political-Economy, with the average work week at 33.2 hours, with anemic demand, unemployment will be high and persistent.

High and persistent unemployment will cause the Political Anger Factor to rise exponentially.

Nov 03 07:38 PM

[Plan B Econ...:]

You need a recovery to have a jobless recovery.

Nov 03 10:42 PM