Good Employment Health is a Fragile Thing
Alex Carrick
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Seed Newsvine |
Job Losses Amount to 232,000 in First-Quarter 2008
There was weak U.S. real (inflation-adjusted) Gross Domestic Product (GDP) growth in the fourth quarter of last year and the expectation is that the first half of this year will see negative growth or the closest thing to it. This has given rise to speculation that the U.S. economy is in recession. The March 2008 labor force survey from the Bureau of Labor Statistics records that 232,000 jobs have been lost in the U.S. during the first quarter of this year.
The National Bureau of Economic Research, Inc. (NBER) in Cambridge Massachusetts is the official arbiter when it comes to assigning dates to business cycles in the United States. The last “official” contraction lasted from March 2001 to November 2001. However, this does not convey the pain that was encountered on the jobs front. In fact, weakness in employment continued a good deal longer than the downturn in the overall economy.
The Number of Job Losses in the Last Downturn was 2.7 Million
Peak employment in the previous business cycle expansion was recorded in February 2001 at 132.5 million jobs. However, once the downturn settled in, the number of jobs bottomed out in August 2003 at 129.8 million. The jobs decline over the intervening two-and-a-half years was 2.7 million.
Then it took another year-and-a-half for total employment to rise again to the previous peak. In other words, four years passed before the level of peak employment in the previous expansionary phase was matched again in the latest climb upwards. No wonder central bankers strive so hard to hang onto good growth when it does come along. Healthy employment levels are more fragile than they appear to be.
Ten Economic Cycles since 1945
Since 1945, there have been 10 economic cycles in the U.S. The average length of the contractions has been 10 months (i.e., a little less than a year). The average length of the expansions has been 57 months (i.e., almost five years). If it is decided that last fall was the start of the latest contraction, then the prior expansionary phase lasted about six years, which was longer than normal by a little over a year.
Furthermore, if the economy gets back on track by this fall, that will be fairly consistent with the length of most contractions. However, based on history, the outlook for employment may stay depressed for quite some time.
