Every week brings new evidence that the Great Recession may be receding into history.
Factory activity is growing for the first time in 19 months, and orders for durable goods are at their highest level in two years. Home sales are starting to rebound. Consumer confidence has brightened a bit, and the stock market climbed in August.
Still, many anxious Americans are wondering this Labor Day weekend, “Where are the jobs?”
The answer, according to most economists: “Still over the horizon.”
Some 22 months after the downturn started, the engine of job creation that once stood at the heart of the U.S. economy remains stalled, despite a $787 billion government package to stimulate employment.
On Friday, the Labor Department reported that employers cut another 216,000 jobs in August, while the jobless rate jumped to 9.7 percent. About 6.9 million payroll jobs have been lost since the recession officially began in 2007, and the number will likely reach 8 million before it ends, estimates Mark Zandi, chief economist for Moody’s Economy.com.
Another Full Year or Longer
A number of economists believe that it will take another full year—and perhaps longer—before enough new opportunities are created to put a real crimp in the nation’s unemployment rate.
Employment is considered a lagging, not a leading, indicator of economic growth. Business owners are faster to fire than to hire. They cut their workforces as soon as they foresee a substantial falloff in revenue or see any hints that clients may be slow to pay their invoices or place new orders. Then they like to see sustained improvement in their bottom lines before hiring again, because it’s costly to find workers and train them—and to dismiss them if necessary.
When the nation seemed on the verge of a financial meltdown last fall, many businesses chopped their payrolls to the bone amid fears they might not survive the winter.
“The decline in labor market has been extremely rapid, and the employment fall has been more severe than we might have expected,” says Nigel Gault, chief U.S. economist for IHS Global Insight. “Companies were determined not to get behind the curve and not be left with excess labor in a market where demand was continuing to plunge.”
He found little encouraging news in Friday’s figures, saying, "With the workweek flat and temporary help still declining, there were no leading indicators in the report suggesting that we'll actually be adding jobs this year. "
Gault believes there is a silver lining in the fact that companies were so quick to axe workers last year. He sees a possible blip in new hiring in the second quarter of 2010—when the federal government brings on thousands of temporary workers to conduct the decennial census—and momentum in job growth as the year progresses.
But among economists, that’s an optimistic view.
‘The Free Fall Is Over, But ...’
“The free fall is over, but the jobs are not there, and are not going to be there,” warns Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University. “We simply don’t have the business investment going on right now.”
Zandi predicts that “unemployment will continue to rise in coming months, peaking near 10 percent, and remain there for much of 2010.”
The job losses already felt across America in this recession have been “extraordinarily severe, broad-based across industries and regions, and permanent,” Zandi says.
About half the jobs lost in the recession have been in the construction and manufacturing sectors. As automotive workers in Michigan have learned with some bitterness, many of those jobs will never come back.