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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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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,
 Joseph J. Seneca,
University Proessor 
Issue Paper Number 1 • September 2009
James W. Hughes &Joseph J. Seneca, Editors
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
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
America’s New Post-RecessionEmployment Arithmetic
See page 2
James W. HughesJoseph J. Seneca
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
than the annual growth in the numbero people in the labor orce. In contrast, in the
 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.
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
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.
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 
2001–2007 expansion, private-sector employmentgrowth was 550,000 jobs
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.
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!
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.
 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.
 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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