The usual hysteria/confusion over the release of new ADP jobs number and the revision of ‘old’ GDP continues to obscure or crowd out some very sobering demographic numbers that have been before us since 2009.
First the ‘news’ from ADP, according to Bloomberg: (http://www.businessweek.com/news/2012-05-31/adp-employer-services-says-u-dot-s-dot-added-133-000-jobs-in-may) “Companies in the U.S. added fewer workers than forecast in May, a reminder the job market will take time to strengthen, a private report based on payrolls showed. The 133,000 increase in employment followed a revised 113,000 gain the prior month that was smaller than initially estimated, Roseland, New Jersey-based ADP Employer Services said today. The median estimate of 39 economists surveyed by Bloomberg News called for a May advance of 150,000.”
Next the ‘news’ on GDP according to Fox Business (http://www.foxbusiness.com/economy/2012/05/31/us-1q-gdp-growth-revised-lower/#ixzz1wSBETPAn): “U.S. economic growth was a bit slower than initially thought in the first quarter as businesses restocked shelves at a moderate pace and government spending declined sharply. Gross domestic product increased at a 1.9 percent annual rate, the Commerce Department said in its second estimate on Thursday, down from last month’s 2.2 percent estimate. The economy grew at a 3.0 percent rate in the fourth quarter.”
If it were up to me all the news agencies would do each month these numbers come out is call Rutgers University Professor Joseph J. Seneca and ask him how the latest job creation estimates jive with his seminal 2009 report, “America’s New Post-Recession Employment Arithmetic” published in September of 2009 in the Advance & Rutgers Report: An Analysis of Economic, Business & Demographic Trends.
In the Wall Street Journal October 5, 2009 article, “It Will Be Years Before Lost Jobs Return — and Many Never Will ” by Sudeep Reddy Professor Seneca’s research was cited in the following manner:
“In addition to replacing 7.2 million lost jobs, the economy needs an additional 100,000 a month to keep up with population growth. If the job market returns to the rapid pace of the 1990s — adding 2.15 million private-sector jobs a year, double the 2001-2007 pace — the U.S. wouldn’t get back to a 5% unemployment rate until late 2017, Rutgers University economist Joseph Seneca estimated. And that assumes no recession between now and then. “Even with some very optimistic assumptions, it’s a long road back,” Mr. Seneca said.”
I contacted Mr. Seneca – who taught me economics 20 years ago – sending him the following question, “since the Recession officially shed 8.8 million jobs – when do you determine the what do viagra and cialis do if taken together United States would reach the 5% unemployment level?”
He replied to me: “Here is the link (http://policy.rutgers.edu/reports/arr/arrr1Sept09.pdf) to the study that was referred to in the WSJ article. We actually began the analysis with an 8.6 million private sector job deficit. So, I think the estimate of 2017 before we return to “normal” (i.e., a 5% unemployment rate that existed in Dec. 07) would remain about the same. Again, this assumes the optimistic job growth numbers we use in the report and an accompanying assumption of no recession in the meantime!”
Last September I wrote a briefing on what ‘no one’ is reporting: During The Great Recession 8.8 million jobs were lost. In addition to replacing 8.8 million lost jobs, the economy needs an additional 100,000 a month to keep up with population growth. If the job market returns to the rapid pace of the 1990s — adding 2.15 million private-sector jobs a year, double the 2001-2007 pace – it would take the United States 4 years to replace the 8.8 million jobs. But that is not counting another 4.8 million jobs needed just to keep up with population growth. That makes a total of 13,600,000 jobs that need to be created. At that rate it would take 6 years plus a quarter or around 75 months to get back to a national 5% annual rate of unemployment.
So the ADP numbers and GDP revisions, if accurate, show that the United States economy is only producing enough jobs to do a little better than keep pace with population growth. When one combines this with the frightening news that Federal Reserve Bank of Minneapolis President Narayana Kocherlakota recently stated “…our country’s current labor market performance is much closer to ‘maximum employment,’ given the tools available to the FOMC, than the post-World War II U.S. data alone would suggest.” As Louis D. Johnson astutely notes, “What does that last sentence mean? In plain English: Kocherlakota believes that unemployment won’t fall much below 8 percent for the foreseeable future.” (http://www.minnpost.com/macro-micro-minnesota/2012/05/why-minneapolis-fed%E2%80%99s-kocherlakota-wants-interest-rates-rise).
The projection I am making based upon all of this is unavoidable.
Even with a full term in office for either President Obama and President Romney, they still are highly unlikely to restore the jobs lost during the Great Recession much less bring the economy back to unemployment levels seen during the reign of President Bill Clinton.
May 31, 2012