Great article from the NY Times my dad sent me.... loved the chart (for a bigger/clearer version: click the link and click on the multimedia box in the left hand column)
Recessions have their milestones. There is the start, of course, in this case December 2007; the worst months, the winter and spring of this year; the gradual return to economic expansion, late this year maybe; and, finally, adding jobs.
That last one is a tough call, because this recession in some very important ways is not only deeper than any we’ve had since the 1930s but is particularly hard on family income and savings. And without family income and savings, consumption — and the jobs it produces — are put off.
Most Americans don’t consider a recession really over until work is once again plentiful, and the unemployment rate — which is now at 9.5 percent — finally starts going down. Ask economists when that will occur this time and they hesitate. No sooner than next summer, nearly all of them say. And that’s a guess, verging on wishful thinking.
“It is going to take a while for manufacturing and construction to stop losing jobs, and it will take time for businesses to be confident enough to go out and hire,” said Mark Zandi, chief economist at Moody’s Economy.com, who says the necessary confidence won’t return before next summer.
When it does, the hiring is likely to be spotty and cautious. Health care and education, for example, have added workers throughout the recession and as that steady hiring continues in post-recession America, the overall job numbers will finally begin to rise — not from a surge in the hiring of health care workers and teachers, but because fewer and fewer jobs will be disappearing in other sectors.
“You are combining a very deep recession with what at this point looks like a sluggish recovery,” said Jan Hatzius, chief domestic economist at Goldman Sachs.
Steep recessions — and few in American history have been steeper than this one — are usually followed by vigorous, steep recoveries that include job growth, particularly in manufacturing and retailing, as people make purchases they had put off. The result is a chain reaction in which stores reorder, factories hum and workers are hired. Satisfying pent-up demand, this process is called.
But this time is clearly different. The pent-up demand is not present — not with 6.46 million jobs gone in just 18 months and hundreds of billions of dollars in wages extinguished. Credit is harder than ever to get for those who might want to spend again, and there are fewer and fewer spenders. People who do have jobs are saving (not spending) more of their incomes than they have in years, trying to replenish wealth lost in the stock market and in the declining value of their homes.
And, perhaps most important, millions of workers on short schedules will very likely get their hours back before their bosses hire new people.
“We are talking the equivalent of adding back four to five million jobs just by restoring hours lost in this recession,” said Dean Baker, co-director of the Center for Economic Policy and Research. “That process of adding back hours won’t start before next June,” he says, “and I’m not confident it will begin even that soon.”
So much for a surge in hiring or spending. If there is what seems like a job surge next April and May, that will be because the Census Bureau is hiring 1.2 million census takers in those months for the 2010 census. The work is part time, but it will bolster the national employment rolls — only to be subtracted once the work is done in July.
Coming out of steep recessions in the past, home building, like manufacturing, flourished and the hiring of construction workers surged. Nearly half a million construction jobs returned after the steep 1981-1982 recession. Not this time. Too many homes were built during the bubble years before 2008, and too many office buildings. The glut has to be worked off before there is much new construction, or hiring.
The recovery, then, given the circumstances, is likely to come not with job growth, but “a diminution in job loss,” as Mr. Hatzius put it. Like some other forecasters, he expects the economy to start growing by the end of the year.
Maybe that is already happening. But it is growth without jobs — yet another jobless recovery, like the last two, this time on a giant scale. We came out of the 2001 recession into a recovery in which fewer than 60,000 jobs were lost each month, on average, not the hundreds of thousands a month very likely to disappear in the recovery to come.
That is a political problem, of course, particularly if the nation is not yet adding jobs as the Congressional election approaches next year. Mr. Zandi estimates that the stimulus package is likely to generate 2.5 million jobs. The president’s Council of Economic Advisers put the number at 3.5 million by the end of next year. Either way, that is not much of an offset for an economy that has already lost nearly two million jobs since the stimulus was enacted in February.
Such numbers suggest that if the goal is a job surge coming out of the current recession, then another stimulus package is needed, and a big one, perhaps as much as $1 trillion packed into a single year of spending, some economists say. Consumer spending and business investment provided such a kick coming out of steep recessions in the past.
In their absence this time, job growth will inevitably resume as the recession gradually ends, but at a trickle, not a torrent. Health care and education seem certain to lead the way, with isolated help from the oil industry, pipeline construction companies, utilities, computer design firms and the federal government.
Mr. Zandi projects that once the employment rolls begin to grow again, in the second half of next year, nearly half the hiring will come from public schools, hospitals, nursing homes, outpatient care centers and physicians’ offices. Not that the numbers will be so great — on the order of 100,000 jobs a month, or less, for all these categories together. That increase is needed to care for aging baby boomers and a bulge in the population of young people.
Hotels and restaurants are also likely to expand their staffs as people relax a bit. And retailers, too, are expected to add workers cautiously, after downsizing hugely during the recession.
There might even be a surprise, adds Robert Barbera, chief economist for the Investment Technology Group. “Some new and exciting area of job growth may emerge,” he said, “although I can’t guess where that might be.”
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