The US Pattern of Structural & Long-Term Joblessness: “The Big Picture”

by Frank Thomas

Americans are chronically afflicted by an unemployment crisis of historical proportions …. even as the country slowly moves out of a severe recession.   

In periods of economic expansion prior to the 1980s, BLS statistics show that private-sector jobs grew on the average 3.5% annually.  During the economic expansions in 1980s and 1990s, job growth fell to an average of 2.7% to 2.2%

annually, declining further the last decade to an ominously low 0.9% annually. 

Here’s factual data for the last three economic expansion periods in a report by Advance & Rutgers, “America’s New Post-Recession Employment Arithmetic:

 

TABLE 1: U.S. Private-Sector Employment and Total Labor Force Growth:

Last Three Economic Expansions

A.1982 -1990 Expansion (7.67 Years)	Private-Sector	Total Labor Force
Nov.  1982	72,793,000	111,050,000
July  1990	91,215,000	125,732,000
Ave. % Increase/Year	2.7%
1982-1990 Total Growth	18,422,000	14,682,000
Ave. Growth/Year	2,401,825	1,914,211

Conclusion:

Private-sector job increases averaging 2.4 milllion/year exceeded much slower total labor force  growth of 1.9 million people. Thus, job increases far surpassed labor force increases.

B.1991-2001 Expansion (10.0 Years)	Private-Sector	Total Labor Force
March  1991	90,047,000	126,238,000
March  2001	111,555,000	143,924,000
Ave. % Increase/Year	2.2%
1991-2001 Total Growth	21,508,000	17,686,000
Ave. Growth/Year	2,150,000	1,768,000

 

Conclusion:

The same pattern occured in the 1991-2001 expansion  where average annual private-sector job increases of 2.2 million were far in excess of 1.8 million increase in the labor force.  However, the average annual increase in jobs declined to 2.2%, representing a 10.5 % yearly decline in the average annual number of new jobs generated compared to the prior economic expansion.

 

C.2001-2007 (6.08 Years)	Private-Sector	Total Labor Force
Nov.  2001	109,575,000	144,240,000
Dec.  2007	115,783,000	153,836,000
Ave. % Increase/Year	0.9%
2001-2007 Total Growth	6,208,000	9,596,000
Ave. Growth/Year	1,020,549	1,577,511

 

Conclusion:

There was a hugely negative reversal in job growth to 1 million annually or ONE-HALF that of the preceding two expansions. Private-sector job growth dropped to a paltry 0.9% while annual labor force growth (persons working or looking for work) was about 557,000 higher than private-sector job growth. This  contrasts with an annual private-sector job growth that was about 400,000 to 500,000 higher than labor force growth in the previous two economic expansions. Thus, the structural pattern of weaker job opportunity defined by growth in jobs relative to the labor force took a dramatic BIG STEP off course during 2001-07 which was a below normal economic expansion.

 

This factor combined with the 2007-09 Great Recession caused the job opportunity pattern to deteriorate WORSE than it has been seen since the Great Depression . In the 20 months between Dec. 2007 and Aug. 2009, 7 million jobs were lost. The private-sector employment downturn comparisons are shocking as the Advance & Rutgers Report shows based on BLS data:

 

 

EMPLOYMENT DOWNTURN COMPARISONS: PRIVATE-SECTOR JOB LOSS

Private-Sector Job-Loss
March 2001 to Nov. 2001	(1,980,000)
Nov. 2001 to August 2003	(1,344,000)
Sub-Total	(3,324,000
Dec. 2007-August 2009	(7,047,000)

In the words of the writers of the Advance & Rutgers Report:

 

“As of August 2009, the nation had 1.3 million fewer jobs than in December 1999. This is the first time since the Great Depression that America has had an absolute loss of jobs over the course of a decade.”

 

The tremendous job loss in the 20 month 2007-2009 Great Recession has been particularly bad for the U.S. service sector … a sector our nation has become increasingly dependent on for overall job growth over the last 30 years. Table 2 shows disturbingly increasing service-sector job vulnerability as documented in the Advance & Rutgers Report:

 

TABLE 2:   U.S. Service Sector Cyclical Exposure Trend

Private-Sector Employment Losses

(Seasonally Adjusted: Numbers in 1000´s)

Period	Total	Goods-Producing (a)	Private-Services (b)
Dec. 2007-Aug.2009	(7,047)	(3,474)  49.3%	(3,573)  50.7%
Mar. 2001-Aug. 2003	(3,289)	(2,704)  82.2%	(585) 17.8%
July 1990-Mar. 1991	(1,168)	(965)  82.6%	(203) 17.4%
July 1981-Nov. 1982	(2,626)	(2,566)  97.7%	(60)  2.3%

(a) natural resources and mining; construction; manufacturing

(b) trade; transportation; utilities; information; financial activities; professional and business services; education and health services;  leisure and hospitality; other services  

 

Our destructive capitalism did a `productive´ job of killing goods-producing jobs in grand style during 1981 through Aug. 2009. We replaced them with service jobs, for example, in the financial sector, i.e., reflecting the grand casino financialization of our society. In this period, the share of job loss by the private service sector has also become increasingly exposed to job losses, reaching  50.7% of job losses versus 17% in previous cyclical periods. In the 1981-82 recession, the service sector experienced a very small 2.3% job loss.

 

So jobs are being lost permanently or semi/permanently on ALL business fronts due to: automation and robotization;  indescrimate outsoucing of factory and white-collar worker jobs to low-cost countries; restricted flow of money to small businesses and new ventures providing the most jobs; declining influence of unions, giant corporations serving institutional investors who crave for immediate profits and short/term thinking management obliging by often cutting payrolls; uncontrolled illegal immigration capturing more and more  income jobs especially from botton 30% of American citizens, and an ill-prepared  social-net system incapable of cushioning the impact of the WORST  social-economic downturn since the Great Depression.     

 

Our economic model has changed in ways that fundamentally makes jobs more scarce. The evidence is the 6 job seekers for every job and the 6.7 million long-term unemployed presently or 46% of the ±15 million now unemployed… causing personal havoc in so many American families with few remaining assets and no social protections.

 

As I’ve said many times before, we’ve gone completely away from a balanced  Stakeholder Priority philosophy so long successfully followed by a business leader I’ve always greatly admired, Warren Buffet, namely:

 

Employees FIRST,

Customers SECOND

Shareholders LAST

 

Rather,we have adopted the greedy profit-shareholder first - expendable humans last - priority paradigm. In the process, we’ve become astutely clever at executing this paradigm no matter the human stress and deprivation maliciously dealt out by the systematic and permanent destruction of jobs.  

 

There are now ±15 million Americans officially reported unemployed or a ±10% unemployment rate …. a rate  that’s not budging much as the many millions not looking for work gradually start looking for a job. The 15 million figure excludes another 7% unemployed or ±8 million people who have stopped trying to get a job.      

 

While the Bureau of Labor Statistics keeps tabs on `discouraged´ workers who have stopped looking for work, it does not include them in the officially reported unemployment numbers. In fact, the Labor Department has said that two-thirds of unemployed people received state provided unemployment checks in 2009. The remainder either did not apply, were not qualified or used up their benefits. In Plain English, the true  American labor unemployment deficit is over 17% or ±23 million people. This means, very conservatively, a bare minimum of 200,000 new jobs a month must be generated for an extended period (slightly higher than the 1991-2001 expansion job that was weaker than prior 1982-90 expansion). It´s all about moving away from a losing battle as America remains in a long-term, structural unemployment crisis even as it moves out of the worst recession since the Great Depression.      

 

Achieving even this subnormal job generation will require the best brains working full time on existing and new sustainable job growth promoting ideas coming from all directions, e.g., stimulating the movement into employee/employer owned cooperatives, more independent self-starters and small businesses as John Lawrence writes about.

 

SUMMARY

 

The overwhelming BIG PICTURE is this: assuming our nation can return to generating the 2.1 million new jobs a year achieved in the 1991-2001 economic expansion (see Table 1), it will take until approximately 2018 before the approximately 8 million officially reported lost jobs now (net of a 5% back-to-normal unemployment rate) plus the approximately 1 million jobs needed annually for labor force growth and the 7 to 8 million officially unreported job losses can be replaced. The true job recovery task is 16 to 17 million jobs or a bare minimum of 175,000 new jobs monthly for approximately 8 consecutive years.

 

According to the BLS, the average length of the 11 U.S. economic recessions since post WWII has been 4.9 years. During the 1990 and 2001 recessions, 31 to 46 months passed before employment returned to its previous level. Given the considerable scale of this decade's job loss to date, returning to and sustaining the moderate 2.1 million yearly job expansion level for the next 8 years, a level that was achieved from 1991 to 2001, appears almost impossible.

     

This is the daunting reality and, as Larry Summers said, “the human recession facing our country” …. out of work, out of savings, out of unemployment compensation, out of hope.

 

ALL HANDS ON DECK, Mr. President!    

       

 

Frank Thomas

The Netherlands

July 8, 2010