As first outlined in EPIC Insights, all eyes will be on the monthly employment report third Friday. The ADP report had a loss of 22,000 jobs for January making it the smallest drop since February 2008. This has encouraged the bulls to forecast that January will show job growth with 15,000 jobs being added and the unemployment rate holding steady at 10%.
With an economy so large, a swing to 15,000 jobs created is statistically insignificant, but would be a welcome break in the string of losses. Since the economy first began losing jobs in January 2008, 7.2 million jobs have been lost. Going back to 1948, that makes the current recession the worst for employment on multiple fronts. It has brought the longest duration of continued losses, the highest number of total jobs lost, and the highest number of losses as a percentage of the population.
With the "Great Recession" sitting as a statistical anomaly on this chart, the question is how soon we will see sustained growth in payrolls and how robust that growth will be. In the pre-1990 period the total number of jobs lost during the recession recovered in 10 months. With the average duration of jobs lost during those recessions being 12 months, the duration of the needed recovery roughly equaled the length of the recession. The post-1990 period offers a much different reading. With an average duration of job loss of 13 months (ignoring the current recession), it took an average of 27 months to recover those jobs, or nearly twice the period of the recession. Granted, the data sample may be small, but if the current environment resembles the pre-1990 period, it could take two years before the economy has added back the jobs lost. However, if our current scenario resembles the post-1990 period, at least four years will pass before those lost jobs are replaced.
As the talking heads leap toward the airwaves Friday morning to offer their expert opinions on the employment report, those looking to invest for the long term should keep some perspective. Eventually job loss will cease and growth will resume, but the likelihood of returning to the good old days is very, very low.
