Four more years until lost jobs come back?

September 11, 2012

By Lee McPheters, editor, Economy@WPCarey

The U.S. economy created 96,000 net new non-agricultural jobs in August, a decrease from the revised figure of 141,000 new jobs in July, according to the latest employment report from the U. S. Bureau of Labor Statistics. The job figure in August was the fourth monthly tally in the past six in which labor markets failed to grow by 100,000 jobs (see table).

Monthly Change in U.S. Jobs: 2012
March April May June July August
143,000 68,000 87,000 45,000 141,000 96,000
Source: U.S. Bureau of Labor Statistics, non-farm jobs, seasonally adjusted, September 7, 2012, subject to later revision.

 The most jobs (28,000) added month-to-month in any industry category were in food services and drinking places. Other categories with relatively large increases included health care and social assistance (21,000), and computer systems design (10,600).

Manufacturing jobs fell by 15,000 in August, after increasing by 23,000 in the prior month. Over the year, however, manufacturing is up by 200,000 jobs, and the sector has added 508,000 jobs so far since 2010.

Four More Years to Regain Lost Jobs?

After the recession began, the overall economy lost some 8.8 million jobs until bottoming out in February of 2010. Since that time, 4 million jobs have been added back, leaving a “gap” of 4.7 million jobs still to be regained (see table). The prior employment peak was 138.0 million jobs in January, 2008. As of August, 2012, there were 133.3 million non-agricultural jobs in the U.S. economy. 

Four More Years to Close the Jobs Gap?
Jobs Lost: Jan. 2008 - Feb. 2010 8,779,000
Jobs Regained to Date 4,056,000
Percent Jobs Regained 46%
Jobs Gap: Jobs to Regain 4,723,000
New Jobs This Month 96,000
Six Month Average Gain 97,000
Years to Return to Peak 4.0
Source: Compiled by W.P. Carey School of Business from U.S. Bureau of Labor Statistics, non-farm jobs, seasonally adjusted, September 7, 2012, subject to later revision.

In a hypothetical world, if labor markets continued to struggle at the pace of the past six months (97,000 jobs per month), the remaining 4,723,000 jobs would not be regained for four more years, at the end of the next presidential term.

Such a dour outlook is extremely unlikely. Between 1980 and 2007, there were only three years (1982, 1991, and 2001) when month-to-month job growth averaged fewer than 100,000 jobs, and these were recession years. Over that same 1980 – 2007 period, the average monthly job growth (including the recessionary periods) was 283,000. While recent data always tell us a lot about the current outlook, it is reasonable to project that job growth will (eventually) increase to average 200,000 to 250,000 jobs per month. The exact time frame for this is unknown, of course, but it seems unlikely that job growth under 100,000 per month will become the new normal.