The State of Jobs on Labor Day 2011

This Labor Day, two months after the second anniversary of our economic “recovery”, it seems appropriate to assess how job markets are faring in the United States and California. It is informative to note that the official dating committee of recessions, the National Bureau of Economic Research, evaluates several different economic indices when assessing the beginning and ending dates of recessions— job growth or loss is just one of those—which is why many workers are surprised that the recession already ended. But officially it has. By the National Bureau’s reckoning, the recession lasted from December 2007 to June 2009.

At its worst, between December 2007 and February 2010, the United States lost 8.7 million jobs—some 6.3 percent of all jobs. To put these losses into context, during the previous three recessions, which occurred in 2001, the early 1990s, and the early 1980s, total peak accumulated job losses were 2.0 percent, 1.4 percent and 3.1 percent, respectively. So two years into the United States’ recovery, the jobs deficit is still 4.9 percent, or 6.8 million jobs, which is much larger than any of the three previous recessions. In terms of the sheer losses of jobs compared to pre-recessionary employment, the U.S. labor market today is in a severe deficit.

California’s employment situation is even worse—currently job losses total 1.1 million which is a 7.3 percent deficit compared to the number of jobs in the state prior to the recession. However, California started shedding jobs a few months before the official start of the recession and they bottomed out a bit later—so, in total the low point was a loss of 1.4 million jobs. This represents a drop of 8.9 percent of jobs in California. Especially striking, private sector job losses in California dropped 10.2 percent at the trough—the state had lost one in ten private sector jobs.  

Thus far in 2011, net growth in employment in the U.S. has been 930,000, a monthly average of 133,000 jobs. That is just above the 125,000 needed to stay even with the growing labor force. The private sector added 1.2 million jobs this year but government jobs are being slashed due to state budget problems and the pursuit of “austerity” measures. Public sector jobs have been cut to the tune of 218,000 thus far in 2011 and well over a half of a million since the recovery began.

In California, overall job growth is also being offset by the loss of government jobs. The private sector added 118,200 jobs in the state, but after subtracting 116,000 lost government jobs, net job creation has been only 8,400 since the recovery began two years ago. We can expect to continue losing jobs in the public sector, given the austerity measures imposed at the national level. Many states such as California are exacerbating the trend as they implement an all-cuts approach to budget balancing.

In sum, there is nothing in the near future that should be expected to get the Great American Jobs Machine back up and running. To the contrary, the news on the economic front in the U.S. and abroad means we cannot reasonably expect to recoup the existing 6.7 million jobs deficit anytime soon. If we include the jobs necessary to account for the growing labor force over the last 3.5 years, 11-12 million jobs are actually needed to get the unemployment rate closer to the 5 percent pre-recessionary rate. Even if jobs grew at an average 200,000 per month (the very best span achieved following the 2001 recession)—it would take well over seven years to return to a thriving nation of contributing workers.

This Labor Day does not bode well for a large swath of America’s workforce. Unemployment has barely budged over the past two years of recovery—from 9.5 percent to 9.1 percent for the country and California’s rate just jumped back to 12 percent in July. A stimulus filled with direct job creation that is to the scale of the jobs crisis is needed. Businesses are not hiring because they have the employees they need to serve their eroded customer base; hiring will only take place when more customers come through the door and it is important to keep in mind workers are customers. Our first priority must be to get workers back to work and the economy growing at a healthy pace—once we tackle this immediate problem many others—such as the deficit—will be much improved.