As Labor Day approaches, many Americans want signs of a job-market recovery. While many are frustrated with the pace of job creation, the job market is actually well on the road to recovery and is rebounding sooner and faster compared to the jobless recoveries that followed the previous two recessions.
By most accounts, we are barely a year into the recovery. At this point in the previous two recoveries – following the 1991 and 2001 recessions – the job market was actually getting worse. Many people are so caught up looking at the weekly and monthly numbers, that they fail to look at the bigger trends, which indicate just how much the job market has improved over the last 12 months.
There is no doubt that the job market has a long way to go before it fully recovers. After all, this is the worst recession this country has experienced in decades, with unemployment climbing to 10.1 percent as the number of jobless American grew by more 8.3 million, reaching a record high of 15.6 million. It doesn’t take an economist or jobs expert to tell you that it is going to take longer to get all of these people back onto payrolls.
No official end has been declared for the recession that began in December 2007. Based on quarterly GDP, which has now seen four consecutive quarters of growth beginning in the third quarter of 2009, many experts are pointing to June 2009 as the presumed end of the downturn.
Of course, those who recall the 1991 and 2001 recessions understand that the end of the downturn does not necessarily mean an end to job market misery. In both cases, the end of the recession was followed by a period of “jobless recovery” during which payrolls continued to lose jobs and the unemployment rate continue to increase. In 1991, the jobless recovery lasted about 15 months and following the 2001 downturn, it took about 19 months for the job market to reverse course.
This recession also experienced a period of jobless recovery. However, an examination of several employment trends suggests that this jobless recovery may have lasted just six months and is now on a positive track.
Layoffs Have Fallen to Pre-Recession Lows…Pre-2001-Recession Lows!
Evidence of improved job stability and security can be seen Challenger’s own tracking of planned job-cut announcements, which reveals a dramatic decline in layoffs since June 2009. From January 2008 through June 2009, employers announced a total of 2,120,668 planned job cuts. The pace of downsizing began to plummet in the second half of 2009.
Through the first half of 2009, employers announced 896,675 job cuts. In the second half of 2009, total job cuts dropped 56 percent to 391,355. The number of planned layoffs fell another 24 percent in the first half of 2010, with employers announcing workforce reductions totaling 297,677.
In the thirteen months since the presumptive end of the recession in June 2009, announced job cuts have averaged 56,208 per month. In fact, monthly job cuts have numbered fewer than 100,000 for 14 consecutive months, a streak that has not been achieved since 1999-2000.
The post-recession decline in announced job cuts far exceeds that which followed the 2001 recession; a relatively mild downturn that lasted from March through November of that year. In the thirteen-month period following the end of that recession, job cuts averaged 125,262 per month. In fact, the 12-month moving average did not fall below 100,000 until February 2004, when it finally dropped to 96,736. By the end of 2004, the average fell to 86,645.
Payrolls Start Growing Six Months Into Recovery
While announced job cuts have declined dramatically over the last 12 months, many complain that employers have been slow to hire. Indeed, after the estimated end of the recession in June of 2009, payrolls continued to experience net losses totaling nearly 1.1 million between July and December. However, those losses turned to gains as of January 2010, with payrolls experiencing five consecutive months of net growth that saw more than one million new jobs added to the economy.
The gains slowed in June and July as the government shed tens of thousands of temporary Census workers, resulting in overall total non-farm job losses of 352,000 over the two-month period. Despite those losses, payrolls have still seen net growth totaling 654,000 jobs so far this year, due in large part to steady job gains in the private sector. The private sector has had seven consecutive months of job gains, adding a net total of 630,000 new jobs to the economy since January 1.
These gains may appear relatively anemic and will indeed need to be much stronger to begin making a dent in the large number of unemployed. However, while the payroll gains remain weak, they are occurring much sooner when compared to the 2001 recession. Following the end of the 2001 recession, it took 21 months before the economy began to add jobs on a consistent basis.
When steady job gains did occur, they were far from robust. The first five months of consistent job gains, which did not begin until September 2004, saw average net payroll gains of 120,000 new jobs per month. In contrast, the five consecutive months of job gains that ended in May reached an average of 201,000 new jobs per month.
Unemployment Rate Still High, But Falling
Like payrolls, the unemployment rate is beginning to descend sooner in the wake of this recession. Following the end of the 2001 recession, the unemployment rate stood at 5.5 percent. It continued to climb for 19 months, peaking at 6.3 percent in June 2003. Following the nine-month downturn that ended in March 1991, unemployment continued to increase from a recession-ending 6.8 percent to a peak of 7.8 percent in June 1992; 15 months later.
At the presumed end of this recession in June 2009, the unemployment rate stood at 9.5 percent. It also increased in the months that followed. However, instead of increasing for 15 months or 19 months, it appears to have peaked at 10.1 percent in October 2009, just four months after the end of the recession. As of July, the unemployment rate had fallen to 9.5 percent.
Additional Employment Statistics Revealing Positive Trends
In addition to payroll and unemployment figures, other statistics provide further evidence of a job market turnaround. For example, the number of Americans working part time in for economic reasons has fallen from a peak of nearly 9.2 million last October to just under 8.4 million in July.
Additionally, while the number of people out of work for 27 weeks or more remains near a historic high, it has dropped by nearly 200,000 from a peak of 6,763,000 in May to 6,572,000 last month. Furthermore, the median duration of unemployment stood at 22.2 weeks in July, which was down from 25.2 weeks a month earlier. That decline may not seem significant on the surface, but it represents the largest one-month decline in the median duration of unemployment ever recorded.
The duration of unemployment should continue to fall as hiring begins to accelerate. The latest data from the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey show that employers hired 4,254,000 new workers in June, up 10 percent from a year earlier when new hires totaled 3,856,000. The number of job openings also increased, reaching 2,937,000 in June, compared to 2,519,000 a year ago.
So, why are so many people so pessimistic?
Consumers, business owners, hiring managers and even politicians tend to be overly optimistic at the beginning of a recession and overly pessimistic at the beginning of a recovery.
In the early stages of a downturn, many businesses are still adding workers. People who lose their jobs early in a recession have severance money, unemployment insurance and rainy-day savings to prop up their spending. However, by this point in the recession-recovery cycle all optimism, not to mention rainy-day spending money, is long gone.
Making matters worse is that with the mid-term elections just three months away, both parties have a vested interest in talking down the economy. Democrats want to set the bar low so they can show improvement; Republicans want the jobs picture to look as bad as possible so they can take back some of the seats they lost in 2008.
Obviously, for the millions of Americans who are still out-of-work, the improvements are not coming fast enough. However, it is important to remember that the economy is digging itself out of the deepest hole this generation of workers has ever experienced. The recovery is not going to occur overnight and not without hitting some bumps in the road.
Labor Day Resolutions
Unfortunately, even as cash-rich businesses begin to gain more confidence and start adding workers at an accelerated pace, hiring will never occur as quickly as most people would like. We have seen more than 600,000 Americans added to payrolls in the last seven months, but that barely makes a dent in the more than eight million who joined the ranks of the unemployed during the recession.
Hiring will accelerate in the coming months, but not before employers maximize the productivity of their existing workers by adding new technology and increasing hours. In the meantime, the job market will remain fiercely competitive as the recently unemployed square off against the long-term unemployed as well as with job seekers re-entering the labor pool after abandoning it out of frustration.
Job seekers should view Labor Day as the beginning of the workplace New Year and make a resolution to abandon all passive job-search strategies for ones that are far more aggressive.
In this environment, job seekers cannot rely on simply answering internet help-wanted advertisements. One has to make a full-time job out of expanding his or her network, meeting with people face-to-face everyday, cold-calling companies that are not advertising job openings and being creative when it comes to selling yourself.
As Labor Day approaches, job seekers should view it as a new beginning; a chance to regroup and renew their resolve. For those who have been out of work for a prolonged period – a year or more – it is particularly important to remain vigilant in the job search.
It may be time to consider relocation or switching industries. The long-term unemployed may be forced to take a position he or she doesn’t want or that doesn’t meet salary expectations. However, it is critical for these people to get back into the workforce in order to make themselves more marketable going forward.