Job growth math: What would a jobs recovery look like?
By Neil Irwin
So just what would a "good" jobs report look like, anyway, given that we're in a world of 9.5 percent unemployment? Unfortunately, the answer is kind of depressing. Keying off of a chart from the Hamilton Project cited by my colleague Ezra Klein, let me show you how the math works.
Decent job growth starts with employers adding enough new jobs each month to accommodate the constant growth in the labor force -- population growth, basically. Having fired up my trusty spreadsheet, I can tell you that in the decade concluded at the start of the Great Recession (January 1998 through December 2007), the labor force rose by an average of 139,800 jobs a month. Labor force growth may be slowing due to changing demographic trends, so most economists now estimate that the labor force is growing at 120,000 to 130,000 people a month. We'll use the lower of those two numbers to be conservative.
In other words, it takes 120,000 new jobs a month, and maybe more, to keep the unemployment rate unchanged.
So what would it take to get the unemployment rate to come down at a rate of, say, 1 percentage point a year? There were about 155 million people in the American labor force in June, so about 1.5 million jobs would need to be created over and above the labor force growth number to bring the jobless rate down by 1 full percent. On a monthly basis, that would be 125,000 jobs.
Add 120,000 and 125,000, and you have the depressing answer: We need employers to create about 245,000 net new jobs each month to bring the unemployment rate down 1 percentage point a year. At that rate, it would still take about four years to get down to the 5.5 percent rate that is consistent with a healthy economy.
So how is job growth actually stacking up now? Excluding temporary Census employment, job growth in April, May and June averaged 123,00 net new jobs. In other words, we're not just in a deep jobs hole, we haven't started climbing out in any substantial way.
July 16, 2010; 3:00 PM ET
Categories: U.S. Economy
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