STOCK MARKET WATCH -- Friday, 13 January 2012

[Demeter]

51. If we add 200,000 jobs a month, will recovery take 7 years or 12 years? by Ezra Klein

http://www.washingtonpost.com/blogs/ezra-klein/post/if-we-add-200000-jobs-a-month-will-recovery-take-7-years-or-12-years/2011/08/25/gIQA6AFtqP_blog.html?hpid=z14

GRAPHIC PORN

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Before the recession, the economy needed to produce 120,000 jobs a month just to keep up with new entrants into the labor market. Lately, that number has been closer to 90,000. Part of this is that immigration has fallen and many immigrants are leaving. Part of it is that some workers are leaving the labor force — either they can’t find a job and have given up, or they have decided to stay home with the kids or focus on other pursuits rather than take the sort of jobs they can get right now.

The question is whether the growth of the labor force bounces back or holds steady. And it turns out, this question matters a lot. This table that Greenstone sent along shows how long it will take to reverse the jobs losses at different rates of payroll and employment growth. As you can see, if we’re adding 200,000 jobs a month, it will take almost twice as long to recover if we’re adding 125,000 workers a month rather than 90,000:

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That said, this is a case where a longer recovery could mean a better recovery. If we continue growing at 90,000 jobs a month, it likely means that many of the long-term unemployed never made it back into the labor force, and that the economy is producing less than it otherwise could. It means, in other words, that the recovery is proving unable to reverse some of the deepest wounds inflicted by the recession. If we get catch-up growth in the labor market, that may push back the return of full employment, and it may even temporarily increase the unemployment rate, but it will mean we’re seeing a fuller recovery.