Jobs Growth Far from Strong: It Will Be 2018 Before the Economy Looks like 2007
What adjective should we use when we talk about job growth of 214,000 in October? Is it strong, weak, solid? Is it enough? Enough for what?
Take an amble with me through some calculations. If you don’t care to take a walk, the punchline is that if we extrapolate this rate of jobs growth into the future, it will be 2018 before we return to a labor market resembling the one we had before the recession began.
Now for the math. Employment fell dramatically through the recession and its aftermath. The economy has been consistently adding jobs over the last four and a half years. But, we are still experiencing a 6.1 million job shortfall. That’s the amount of jobs needed to keep up with the growth in the potential labor force, shown in the figure below.
Each year, the population keeps growing. Along with it, the potential labor force keeps growing. The chart below projects out the potential labor force in the future. Then, we ran a variety of scenarios to determine how many jobs we need to create each month to get to that line. The reality is that at this month’s pace of job growth, it will take until 2018 to hit the employment level needed to return the economy to the labor market health that prevailed in 2007.
If we want to return to the labor market health that prevailed in 2007 much sooner, say, by the end of 2015, we need to start creating 500,000 jobs per month. If we are willing to wait another year and achieve a recovery by the end of 2016, then we’d be willing to accept a growth rate of 305,000 jobs per month.
Between the jobs gap and the sluggish wage growth, it is clear that we are fall from a full recovery.