September 24, 2020

Economix Blog: Comparing Recessions and Recoveries

Source: Bureau of Labor Statistics. Source: Bureau of Labor Statistics.



Dollars to doughnuts.

The Labor Department delivered some decent news today, reporting that the nation’s employers added 171,000 jobs in October, plus 84,000 more jobs in August and September than initially estimated. The unemployment ticked up a bit to 7.9 percent from 7.8 percent, but that’s because more people decided to join the labor force and so were newly counted as unemployed.

Job gains were widespread across the private sector, led by professional and business services, health care and retail.

But employment still has a long way to go before returning to its prerecession level.

The chart above shows economywide job changes in this last recession and recovery compared with other recent ones; the black line represents the current cycle. Since the downturn began in December 2007, the economy has had a net decline of about 3 percent in its nonfarm payroll jobs. And that does not even account for the fact that the working-age population has continued to grow, meaning that if the economy were healthy we should have more jobs today than we had before the recession.

Getting the economy to 5 percent unemployment within two years — a return to the rate that prevailed when the recession began — would require job growth of closer to 280,000 per month.

There are now 12.3 million workers looking for work who cannot find it. The tally of those who are “underemployed” — that is, adding in those workers who are part time but want to be employed full time, and workers who want to work but are not looking — is an even larger 23 million.

As bad as all these figures are, it’s worth remembering that job markets in the decade following a financial crisis are always terrible. In fact, layoffs were far worse and lasted much longer in the aftermath of the financial crises that struck, for example, Finland and Sweden in 1991 and Spain in 1977, not to mention the United States during the Great Depression.

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