7.9 million jobs lost, many forever
Chris Isidore, senior writer, On Friday July 2, 2010, 4:28 pm EDT
The recession killed off 7.9 million jobs. It's increasingly likely that many will never come back.
The government jobs report issued Friday shows that businesses have slowed their pace of hiring to a relative trickle.
"The job losses during the Great Recession were so off the chart, that even though we've gained about 600,000 private sector jobs back, we've got nearly 8 million jobs to go," said Lakshman Achuthan, managing director of Economic Cycle Research Institute.
Excluding temporary Census workers, the economy has added fewer than 100,000 jobs a month this year -- a much faster and stronger jobs recovery than occurred following the last two recessions in 2001 and 1991.
But even if that pace of hiring were to double immediately, it would take until 2013 to recapture the lost jobs. And the labor market very likely doesn't have years before it gets hit with the shock of the inevitable next economic downturn.
"It's virtually certain that the next recession will come before the job market has healed from the last recession," said Achuthan. (Read 'Stimulus: The big bang is over')
More frequent recessions: Despite signs of slowing economic growth, Achuthan is not predicting that the U.S. economy is about to fall into another downturn later this year.
But a combination of a slower growth and greater volatility is a prescription for as many as three recessions over the upcoming decade, he said.
"We've entered a era where the United States will see more frequent recessions than anyone is used to," Achuthan said.
One of the big problems is that many of workers who have lost jobs were in industries that are not likely to recover their former strength.
"We've got the wrong people in the wrong place with the wrong skills," said John Silvia, chief economist with Wells Fargo Securities. He said construction workers in California or Florida and auto workers in Michigan will have to relocate and retrain to find new jobs.
"As many as half the people who lost their jobs will have to find something else to do," said Silvia.
Home building lost nearly 1 million jobs since the start of 2008, while the auto industry shed 300,000 manufacturing jobs due to plant closings. The finance and real estate sectors lost more than 500,000 jobs.
"Those are the areas with the biggest bubbles, and so it's not a surprise that those are the areas with some of the biggest job losses," said Scot Melland, CEO of Dice Holdings, a provider of specialized career web sites. "Many of the jobs we lost are never coming back."
More new workers: And recapturing the lost jobs fixes only part of the problem.
The nation's working-age population grows by about 150,000 people a month. So the hole is deeper than it looks.
It would take the creation of 10.6 million jobs immediately for the same percentage of the population to be working as was the case three years ago.
Of course, it will take time to create jobs. If it takes three years, more than 3.5 million additional jobs will be needed because of continued population growth.
The unemployment rate is currently 9.5%. A return to the 4.4% rate it was the summer before the recession started in 2007 is out of reach.
In fact, the Federal Reserve, in its latest forecast, predicts that unemployment will stay around 7% or above through 2012, and in the 5% to 5.3% range in the long-run.