Job growth still lagging two years after recession's end

A sign points job seekers in the right direction at a job fair in Denver, but the unemployment data released Friday did not bode well.
A sign points job seekers in the right direction at a job fair in Denver, but the unemployment data released Friday did not bode well. (MATTHEW STAVER / Bloomberg News)
Posted: June 05, 2011

Two years ago this month, the worst recession since the Great Depression came to its official end.

That same month, Ted Fitzer, a finance director from Chalfont, lost his job. For him, it was the beginning of a sustained period of economic decline.

Two years later, what has changed?

The answer, for Fitzer and the economy, is very little. Whatever employment growth there was in 2010 and early 2011 appears to have stalled.

When the recession ended in June 2009, 14.8 million people were unemployed. Two years later, 13.9 million remain jobless.

"They say it's the end of the recession," Fitzer said, "but the unemployment numbers don't show that."

On Friday, the U.S. Labor Department said the nation's payrolls grew by 54,000 jobs in May, a bad report, particularly after three months of growth around 200,000.

"All the improvement we've seen hasn't been because employment has gone up," said Heidi Shierholz, a labor market economist at the Economic Policy Institute in Washington.

"It has been people who have given up [looking for work], or not entered the labor force," she said.

Particularly telling, Shierholz said, is the stagnant employment-population ratio - the number of people employed as a percentage of the working-age population. If the economy were better, the percentage would be higher.

Four years ago - just before the recession started - 63 percent had jobs. By the end of the recession, that was down to 59.3 percent, and it has been a steady 58.4 percent since January.

"Just four years ago, 63 percent wanted a job and could get one," she said. "This massive decline is a huge, obvious, clear immediate loss to families who are taking a hit, but it's a longer run of potential loss for our larger economy."

The loss, she said, not only comes in reduced buying power, but also in the loss of workers' skills and contributions to future economic growth.

Typically, when a recession begins, companies hang on to employees in hopes of weathering the downturn.

As it deepens, companies toss their workers overboard, hoping to lighten their sinking balance sheets. Even after the recession officially ends, it may take months of rising unemployment before hiring resumes and the number of unemployed begins to fall.

That's months, not years.

But since the early 1990s, postrecession unemployment has continued to rise for much longer, hence the now-familiar term "jobless recovery."

In March 1991, when a nine-month recession ended, 8.9 million were unemployed. It took 35 months for unemployment to fall back to that number. It was 33 months before the number of unemployed people fell below the 8 million who were jobless at the close of the last recession in November 2001.

By that standard, this recovery almost seems swift.

When the recession began in December 2007, 7.7 million were unemployed. When it ended in June 2009, 14.8 million were out of work. Unemployment rose to 15.6 million in October 2009. In May, 13.9 million were unemployed - still a daunting number.

Peter Morici, a University of Maryland business professor, estimates that 365,000 jobs must be created every month to bring unemployment down to 6 percent in the next few years. Even the 200,000-plus per month earlier this year is insufficient.

"Each year, the working-age population increases 1 percent and productivity advances about 2 percent; hence [gross domestic product] growth in the range of 3 percent is necessary to keep the unemployment rate steady," Morici wrote in an e-mail.

"Coming out of a deep recession, growth in the range of 4 to 5 percent is needed to get unemployment down to 6 percent over the next several years." In 2010, GDP growth was 2.9 percent.

Fitzer sees some evidence of a slowly improving economy. Some friends of his are beginning to get jobs, and he has a part-time job that is helping make ends meet as he hunts for full-time work.

"You've got to keep at it," he said. "I'm trying to keep my attitude positive."


Contact staff writer Jane M. Von Bergen at 215-854-2769 or jvonbergen@phillynews.com.

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