U.S. jobs: Return to peak years away

Within the broad categories reported by the BLS, the most jobs (49,000) were added in professional and business services. This grouping includes higher paying professional and technical jobs such as computer systems designers (up by 7,000) and management consultants (up 6,300), as well as temporary help services (up 21,800).

Other categories posting sizeable increases included leisure and hospitality (27,000), manufacturing (25,000) and health care and social assistance (19,100). There were negligible changes in construction and finance employment, and government lost 9,000 more jobs in July.

Return to Prior Peak Is Years Away

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 4.8 million jobs still to be regained (see table). The prior employment peak was 138.0 million jobs in January, 2008. As of July, 2012, there were 133.2 million non-agricultural jobs.

If labor markets continued at the pace of the past six months (131,000 jobs per month), the remaining 4,778,000 jobs would not be regained for three more years, in the summer of 2015.

If that timetable was followed, the current employment cycle would extend for a total of seven and one half years (90 months) from peak to trough and back to prior peak. In comparison, the employment cycle from peak to trough to peak for the recession of 2001 was four years (48 months). At the time, that cycle was labeled as the “Jobless Recovery.”

Great Recession – Greater Job Loss

While the recovery to the prior peak will take much longer this time, the depth of the employment contraction in the Great Recession was far more severe than any modern downturn. In the recession of 2001, non-farm employment fell by 2.7 million jobs between February of 2001 and August 2003, a decline of 2.0 percent. The 8.8 million jobs lost in the Great Recession between January 2008 and February 2010 represented a decrease of 6.4 percent of employment. By either measure (percentage or absolute job loss) the recent labor market contraction was three times more severe than the 2001 recession. Considering the depth of the downturn, a protracted recovery is not surprising. With 4.8 million more jobs yet to regain, even if job growth were to double (260,000 per month), the economy would still require 18 months of uninterrupted growth to return to the prior peak.

Lee McPheters is research professor of economics in the W. P. Carey School of Business at Arizona State University and director of the school's JPMorgan Chase Economic Outlook Center. The center specializes in economic forecasts for Arizona and the Western states. Dr. McPheters is editor of the Arizona Blue Chip Economic Forecast and the Western Blue Chip Economic Forecast newsletters, published monthly by the Center. Respected for his regional and national forecasts, McPheters is a frequent speaker on current conditions in the economy.