The recovery is intact, but it’s subdued. That’s what the latest employment report tells us. Taking into account the figures released by government statisticians this morning the economy has added 654,000 jobs so far this year. A majority of the job creation has come from the private sector. There are some glimmers of heartening news in the report. Specifically, the work week lengthened, wages ticked up a fraction, and private sector job growth more than doubled from the previous month. It reinforces the growing belief among economists and on Wall Street that the ominous prospect of a double dip recession is receding.
Still, it’s going to take a long time for the job market to come back to life. That’s the dismaying message in two created by Michael Greenstone and Adam Looney of the Hamilton Project at the Brookings Institution.
The first chart shows that the U.S. is recovering from the worst labor market in 60 years. The scholars look at the employment-population ratio–the ratio of the number of people employed to the total working age population–of the various recession since the end of the Second World War. The employment-to-population ratio is a broader measure of labor market health than the unemployment rate. By this measure, the U.S. is pretty sick.
The second chart is truly frightening. It suggests how long it might take to bring jobs back to their pre-recession level. So, if future job creation averages 208,000 a month–the average monthly job creation for the best year in the 2000s–it will take 11.5 years or 140 months to reach that goal. A more optimistic scenario is to take the best year of the 1990s. It would take “only” 5 years to close the job gap. It’s worth staring at the chart.
My own sense is that companies will pick up their hiring in coming months, but nowhere near a record pace. The big driver of hiring will be lush corporate profits. “Pofits create jobs and profits continue to be the bright light in this recovery,” says James Paulson, chief investment officer at Wells Capital Management. Lets hope business starts putting out the job-wanted signs soon.