Opinion, Berkeley Blogs

Jobs outlook not pretty this Labor Day

By Sylvia Allegretto

Job losses in recessions of the last decade
Job losses in recessions of the last decade

Next week President Obama will unveil his jobs plan and today’s employment report won’t make it easier for him as job growth was zilch in August.

The post-Labor Day speech will introduce his strategy to promote economic growth and create jobs. The White House has been tight lipped about the details but it is expected new initiatives along with some olds ones will be forwarded. I won’t speculate as to what is going to be included in the President’s plan—instead I’ll highlight the jobs situation as it is on this Labor Day, and in light of this past June marking the second anniversary of economic recovery.

“Recovery?” you say. It is informative to note that the official dating committee of recessions, the National Bureau of Economic Research, evaluates several different economic indices when assessing the beginning and ending dates of recessions— job growth or loss is just one of those—which is why many workers are surprised that the recession already ended. But officially it has. By the National Bureau’s reckoning, the recession lasted from December 2007 to June 2009.

The figure below is a colorful, albeit not so pretty, illustration of the jobs situation. Each line represents a recession and starts at the onset of recession and traces monthly job growth. I’ve included four recessions; the current trajectory for the U.S. and California and the previous two recessions for California.

For the most recent recession and recovery (red lines), the U.S. lost 8.7 million or 6.3 percent of all jobs at the low point in jobs. To put these losses into context, during the previous three recessions, which occurred in 2001, the early 1990s, and the early 1980s, total peak accumulated job losses were 2.0 percent, 1.4 percent and 3.1 percent, respectively (not shown). So two years into the United States’ recovery, the jobs deficit is still 4.9 percent or 6.8 million jobs, which is much larger than any of the three previous recessions or any since the Great Depression.

Job losses in recessions of the last decade

California’s employment situation is even worse—currently job losses total 1.1 million which is a 7.3 percent deficit compared to the number of jobs in the state prior to the recession. However, California started shedding jobs a few months before the official start of the recession and they bottomed out a bit later—so, in total the low point was a loss of 1.4 million jobs. This represented a drop of 8.9 percent of jobs in California. Especially striking, private sector job losses in California were 10.2 percent at the trough—the state had lost one in ten private sector jobs. As shown, the deficit in jobs today is far greater than at any point in previous recessions. Today the number of jobs in the state is the same as it was back in 1999.

It is impossible to imagine how long it will take to get back to the zero line (horizontal axis)—which is the level of jobs that existed prior to the recession. It took over five years following the early-90s recession in California—similarly, this time around is much worse in the state compared to the national average. Slow growth along with the recent flatting out of job growth is not a good sign.

Moreover, private sector growth, already tepid, is being severely undercut by public sector losses. Thus far in 2011, net growth in employment in the U.S. has been 872,000; a monthly average of 109,000 jobs—barely enough needed to stay even with the growing labor force. The private sector added 1.16 million jobs this year but government jobs have been cut to the tune of 290,000 thus far in 2011 and about 600,000 since the recovery began. We can expect to continue losing jobs in the public sector for a long time to come given the austerity measures imposed at the national level and states, such as California, are exacerbating the trend as they implement severe cuts to balance their budgets.

There is nothing in the near future that could be expected to get the Great American Jobs Machine back up and running. To the contrary, the news on the economic front in the U.S. and abroad means we cannot reasonably expect to recoup the existing 6.8 million jobs deficit anytime soon. If we include the jobs necessary to account for the growing labor force over the last 3.5 years, 11-12 million jobs are actually needed to get the unemployment rate closer to the 5 percent pre-recessionary rate. Even if jobs grew at an average 200,000 per month (the very best span achieved following the 2001 recession)—it would take about eight years to return the nation to a thriving labor market and economy.

This Labor Day does not bode well for a large swath of America’s workforce. Unemployment has barely budged over the past two years of recovery—from 9.5 percent to 9.1 percent for the country and California’s rate just jumped back to 12 percent in July. A stimulus filled with direct job creation that is to the scale of the jobs crisis is needed. Businesses are not hiring because they have the employees they need to serve their eroded customer base; hiring will only take place when more customers come through the door and it is important to keep in mind workers are customers. Our first priority must be, and should have been a long time ago, to get workers back to work and the economy growing at a healthy pace—once we tackle these immediate problems many others—such as the deficit—will be much improved.