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Main Website >>Investment Management / Alternative Investment >>Blog >> The Recovery Isn't Jobless, But Job Growth Is Still Weak
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James Picerno, Editor, CAPITALSPECTATOR.COM

The Recovery Isn't Jobless, But Job Growth Is Still Weak
Wednesday, March 09 2011 | 04:32 PM
James Picerno
Editor, CAPITALSPECTATOR.COM

A number of pundits warn that the U.S. is suffering from an era of jobless recoveries. It's a popular complaint and it's surely grounded in legitimate concerns about the labor market's strength. But taken at face value, the claim that we're in a jobless recovery is false. The economy's recovering and new jobs are being created. Since the private-sector labor market started growing in the latest cycle in March 2010, total nonfarm private payrolls are higher by 1.5 million through February 2011, based on seasonally adjusted figures, which are used in the analysis below as well. That's a fraction of the jobs lost in the Great Recession, but modest job growth isn't the same thing as a jobless recovery.

The real issue is deciding how the trend in job creation compares with history. To start, let's look at a graph of the monthly change in private nonfarm payrolls over the last 30 years. The average monthly rise for those decades is roughly 93,000, as indicated by the blue line in the chart below. Obviously, the economy has a history of creating jobs over the previous three decades. But it's also true that running a linear regression over those years on the month numbers reveals a gently falling trend (red line). In other words, it appears that the strength of job creation has been weakening through time.



Analyzing the trend over long stretches of time has limits, of course. A more productive focus is comparing job creation during the recovery phases. Considering that there are several ways to proceed, the challenge is deciding how to evaluate the data. One possibility is adding up the total of monthly changes in nonfarm payrolls for each post-recession growth period, based on NBER's cycle dates. By that standard, the last full growth cycle was weak for minting jobs. Nonfarm private payrolls rose by just 6 million from December 2001 through December 2007. By comparison, the gain in jobs during previous cycles was far higher: nearly 22 million for 1991-2011, and 18 million from 1982 to 1990.



Other measures of the labor market's strength also show that the 2001-2007 period looks weak vs. its predecessors. Average monthly job creation was substantially lower in 2001-2007 vs. the earlier periods, for instance. The trend doesn't look any better if we measure the total net change in private nonfarm payrolls as a percentage of the civilian labor force at the peak of each cycle.

Clearly, there's a subpar recovery in jobs in recent years. The big question is whether the 2001-2007 period was an exception or a sign of things to come? Based on the trend since the Great Recession was formally declared history, the case for optimism looks weak.

Measured from the first month of the current expansion, the net change in total private nonfarm payrolls is a mere 362,000. This figure includes the first eight months of the current "expansion," when the economy continued to lose jobs. Before the next recession arrives, surely many more jobs will be created. Indeed, the recent economic news is relatively upbeat for thinking that the recovery is picking up speed. February's jobs report, for instance, was the best in nearly a year.

But it's also true that we are now 21 months into the recovery and total job creation is, at best, modest on both relative and absolute levels. The hope is that this expansion runs longer than usual (the post-World War Two average is 59 months) and/or the labor market accelerates. The prospects on these fronts are mixed. What is clear is that there's a huge amount of ground to make up from the Great Recession and the record so far in repairing the damage is uninspiring. It's not a jobless recovery, but that's cold comfort given the hole we're in.

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