Comments on economics, mystery fiction, drama, and art.

Friday, January 08, 2010

Why I continue to worry about the recovery.

The employment-population ratio peaked in March 2007 at 63.4%.

It has declined consistently since and is now (December 2009) at 58.2%.

That's 33 months of decline so far.

That's a decline of 5.2 percentage points, which is 8.2%.

The previous largest post-World-War II decline occurred in the twin recessions of the early 1980s.

Then, the employment-population ratio peaked in December 1979 at 60.1%.

Then, it bottomed out in February/March 1983 at 57.1%.

That was 39 months of decline.

But the decline was only three percentage points, or 5%.

As our population continues to grow, and employment continues to fall, it will become harder, and take longer, to return to our long-term trend.

Based on the long-term employment trend from January 1950 through December 2007 (before the recession began, but after seven years of sub-standard employment growth), we would expect to have had something around 150 million payroll jobs by the end of 2009. We actually had about 131 million.

If employment grows at 50% above its 1950 - 2007 trend (2.65% per year instead of 1.75% per year), it will take until November 2011 until our economy returns to the pre-recession level of employment. And, to date, employment is still falling.

If employment grows at 50% above its 1950 - 2007 trend, it will take until March 2032 until our economy returns to its long-term trend level of employment.

I am not happy about any of this.

I am especially not happy when UPS lays off 1800 workers and its stock price rises.
(Click on the chart to enlarge it.)


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