Two frightening charts

Chris Farrell From chief economics correspondent Chris Farrell

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.

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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.

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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.

  • Bill Gleason

    First Chart: red curve needs labelled…

  • Bruce W. Morlan

    Given the intense interest in government debt, promised pension plans and other concerns, these charts would really be better references if they were corrected to remove government consumer jobs, that is, jobs that only exist because of taxes collected. It is past time for us to continue to pretend that such jobs contribute to GDP although they do contribute to societal wealth. As productivity increases we either need to continue to increase consumption to use up the excess (this is the Keynsian economic model we are learning to fear), or, perhaps paradoxically, we need to consume less but do so in a more distributed way (artisans not factory workers). How to do that in a free society with intense marketing driving consumption is problematic, it seems to me. Anytime I ask a politician how they see the transition to a post-consumerist society (and I do ask them this) I get blank stares and the “om-madi-pad-me-ohm” chant of “more jobs, gotta grow more jobs”. All consumption, all the time.