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America’s New Post-RecessionEmployment Arithmetic

America’s New Post-RecessionEmployment Arithmetic

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Published by thecynicaleconomist
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America’s New Post-RecessionEmployment Arithmetic
How many years to full employment?
America’s New Post-RecessionEmployment Arithmetic

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Published by: thecynicaleconomist on Jun 01, 2012
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05/13/2014

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United States. The implicationsand conclusions o this sobering arithmetic can be instrumentalin shaping the economic,business, and real estatemarkets as the new decadeevolves. We are grateul or the support o Advance Realty and or PeterCocoziello’s commitment to inorming public debate and discussiono the economic challenges and opportunities acing the nation andNew Jersey. James W. Hughes,
 Dean
 
 Joseph J. Seneca,
University Proessor 
Issue Paper Number 1 • September 2009
James W. Hughes &Joseph J. Seneca, Editors
T
he unolding o the second decade o the new millennium is buta ew months away. There is now a growing consensus among experts, including Federal Reserve Chairman Ben Bernanke, thatthe Great 2007–2009 Recession technically came to an end in thethird quarter o this year. So, it is highly probable that the new decade will begin with the nation’s aggregate economic output onan upward trajectory. However, we are not moving orward roma robust economic oundation—a condition that characterized thestart o the current decade—but, instead, the nation is emerging rom the depths o the worst recession since the Great Depression. Thus, it is vitally important to have a set o realistic economicexpectations o what is to come. Consequently, the subject o thisrst
 Advance & Rutgers Report
(ormerly the
 Rutgers Regional Report
)is developing the daunting arithmetic o employment recovery in the
The Second Decade of the New Millennium
D
uring these challenging economic times, theneed or thoughtul leadership has neverbeen greater. In this highly complex marketplace,new insights, strategies, and ideas are vital or usas a nation, region, and industry to once againlead. There is little doubt that in the uture, thepace o change will only accelerate. As a company that has always prided itsel on continually investing in the best ideas or tomorrow’s workplaceadvancement, Advance Realty is proud to announce its sponsorshipo the
 Advance & Rutgers Report, An Analysis o Economic, Business & Demographic Trends
. A provocative and comprehensive dissection o the conditions aecting our national, regional, and state economies,this series o reports is researched and developed by a distinguishedteam o renowned thought leaders at Rutgers University’s Edward J. Bloustein School o Planning and Public Policy. Intended not only to shed light on the economic challenges we currently ace, thesereports aim to provide a oundation or the creation o solutions tothese challenges.Serving as one o the country’s oremost centers or thetheory and practice o planning and public policy and analysis,the Bloustein School and notably, Dean James W. Hughes andUniversity Proessor Joseph J. Seneca, have been at the oreronto today’s discourse regarding the current state o our economy and what can be expected moving orward.In celebrating our 30th anniversary in 2009, Advance Realty has used this year to refect on the evolution o our company’spast and the path we have developed and continue to orge or theuture. Through our sponsorship o the
 Advance & Rutgers Report
, we seek to expand this philosophy by leveraging a more thoroughunderstanding o today’s economic conditions to devise the mosteective steps needed to achieve a sustainable and prosperoustomorrow.Peter Cocoziello,
 Founder and CEO
—Advance Realty 
A Prosperous Tomorrow
Peter J. Cocoziello
THIS ISSUE:
America’s New Post-RecessionEmployment Arithmetic
See page 2
James W. HughesJoseph J. Seneca
 
2
 
Advance & Rutgers Report
 will be orced into ever greater competition basedon costs, aordability, business climates, supporting inrastructure, labor orce quality, and tax policies.Business as usual will no longer be a easible option.Failure to respond eectively to the new challenges athand will result in economic slow growth or stagnation.
Executive Summary
❒
 The Great 2007–2009 recession is the worstemployment setback in the United States sincethe Great Depression. In the twenty months romDecember 2007 (the start o the recession) to August 2009 (the last month o available data aso this analysis), the nation lost more than 7.0million private-sector jobs.
❒
 The recession ollowed a very much-below-normaleconomic expansion (November 2001–December2007) that was characterized by relatively  weak private-sector employment growth o approximately 1 million jobs per year. This wasless than one-hal o the job-growth gains o the two preceding expansions (1982–1990 and1991–2001), when average annual private-sectoremployment grew by 2.4 million jobs per year and2.2 million jobs per year, respectively.
❒
 This underperormance cannot be appreciably attributed to slower labor orce growth, i.e., workorce shortalls. In the preceding twoexpansions combined, private-sector employmentgrowth per year was approximately 435,000 jobs
higher 
than the annual growth in the numbero people in the labor orce. In contrast, in the
1
 
 A comparison o several key labor market indicators in December 2007 (the month the recession began) with August 2009reveals the extent o the deterioration in national employment conditions. Between those dates, the nation’s unemploymentrate rose rom 4.9 percent to 9.7 percent, the employment-to-population ratio declined rom 62.7 percent to 59.2 percent, thepercentage o the labor orce unemployed 15 weeks or longer increased rom 1.6 percent to 5.1 percent, and the number o discouraged workers more than doubled—rom 363,000 to 758,000.
A
merica aces a troubling arithmetic o employment recovery because o the extremedepth o the employment decit it now aces. This decit is measured as the sum o the heavy recessionary job losses that began in December 2007
 plus
the jobs needed to satisy secular labor orcegrowth both during the recession and in the uture. As a result, it may take the nation until the secondhal o the next decade to return to the pre-recessionlabor market conditions o 2007.
1
Such a long roadback is likely to be necessary even i the nation is ableto achieve above-average annual employment growthor a sustained period o time.It certainly wasn’t supposed to be this way. America had high economic expectations or thenew century/millennium. The strong economicadvances o the 1990s—anchored by a remarkableincrease o 19.2 million private-sector jobs during thedecade—supposedly set in place a solid oundationor continued prosperity. New millennium optimismabounded. Unortunately, the uture turned out quitedierent—the rst ten years o the new century  will become The Lost Employment Decade, withthe nation destined to exit the decade with ewer jobs than when it began. As a consequence, it now looks like the United States will have to spend agood portion o the second decade o the twenty-rst century recovering rom an unprecedentedemployment decit.This has signicant public policy implications orstates, since they will all have to compete ever harderor scarce jobs or their citizenry. There will be noeasy job-growth lits accruing to states simply becauseo strongly rising national employment tides. States
America’s New Post-RecessionEmployment Arithmetic
By James W. Hughes and Joseph J. Seneca
 
America’s New Post-Recession Employment Arithmetic 
3
2001–2007 expansion, private-sector employmentgrowth was 550,000 jobs
lower 
than the growth inthe number o people in the labor orce.
❒
 The combination o a weak economic expansionsandwiched between two recessions (2001,and 2007–2009) produced what will be a lostemployment decade. As o August 2009, thenation had 1.3 million (1,256,000) ewer private-sector jobs than in December 1999. This is theirst time since the Great Depression o the 1930sthat America will have an absolute loss o jobsover the course o a decade.
❒
 To put this new millennium experience intoperspective, during the inal two decades o the twentieth century, the nation gained a totalo 35.5 million private-sector jobs. During thecurrent decade, America appears destined tolose more than 1.7 million private-sector jobs.
❒
Because o the severity o the 2007–2009recession employment losses (–7.0 millionprivate-sector jobs as o August 2009), theUnited States aces a signiicant employmentdeicit as it conronts the realities o a post-recession uture.
❒
Unortunately, the job deicit is actually largerthan the recession employment loss sincelong-term, demographically driven labor orcegrowth has continued, even though the paceo this growth may have been temporarily muted by people discouraged rom entering or returning to the labor orce because o thedepth and duration o recent job losses.
❒
 The U.S. Bureau o Labor Statisticsprojects the nation’s labor orce to grow by approximately 1.3 million persons per yearbetween 2006 and 2016. Thereore, the nationhas to add 1.3 million total jobs per year—consisting o private-sector and governmentpayroll employment as well as contract (non-payroll) employment—simply to accommodatea growing labor orce.
❒
 This 1.3 million annual increase in the labororce means that in terms o private-sectorpayroll employment, the nation has to createan estimated 920,000 jobs per year.
2
Adding this to the actual private-sector job lossesaccumulated during the 20 months (to date)o recession equates to an August 2009employment deicit o 8.6 million jobs. Givenconservative estimates o urther employmentdeclines (even i the recession ends in the thirdquarter o 2009) and the continued increase inthe labor orce, the nation’s employment deicitcould approach 9.4 million private-sector jobsby December 2009.
❒
Erasing this deicit will require substantial andsustained employment growth. Even i the nationcould add 2.15 million private-sector jobs per year starting in January 2010, it would need tomaintain this pace or more than 7 straight years(7.63 years), or until August 2017, to eliminatethe jobs deicit!
3
This is approximately 50 percentgreater than the length o the average post–World War II expansion (58 months).
❒
Under these reasonable (and possibly evenoptimistic) conditions, it will take deep into thesecond decade o the new century or the labormarket o the United States to return to whereit was in December 2007, the start o the GreatRecession. This basic post-recession arithmeticlesson is a very harsh one.
❒
 The extensive economic damage across thecountry has brought down many o the ormerhigh-lying states, but it has also created anopportunity or New Jersey to become a morecompetitive economic player in the uture.However, this will require enormous political will and an intense ocus on policies to grow theeconomy.
2
 
 As detailed in this issue o the
 Advance & Rutgers Report
, the U.S. Bureau o Labor Statistics (BLS) projects that 90 percento total job growth in the 2006–2016 period will be payroll jobs. The authors estimate that 84 percent o these will be in theprivate sector and that 5 percent o the labor orce growth will be unemployed.
3
 
 This was the average annual private-sector job growth during the 10-year 1991–2001 national economic expansion, the longestexpansion in the nation’s history.

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