U.S. Jobs Gap
June 10, 2014
The discrepancy between actual non-farm U.S. payroll jobs and their long-term trend is wider now than in February 2010, the month of the Great recession trough in jobs. The long-term trend in employment growth is 1.84% per year. Jobs rose approximately at that average rate both during the ten years between January 1980 and January 1990 and the ensuing decade to January 2000. If that pace had continued through May 2014, the current level of jobs would be 169,888,000 instead of 138,463,000.
The pre-Great Recession crest of employment, 138.365 million workers, occurred in January 2008. Jobs growth in the naughties was sub-trend even before the Great Recession struck. If the 1.84% annual long-term trend during the final fifth of the 20th century had persisted in the eight years between January 2000 and January 2008, the U.S. would have had 151.331 million workers by the latter date. So over the eight years prior to the Great Recession, jobs fell 12.966 million below the long-term trendline.
In the ensuing 25 months to February 2010, the actual level of U.S. employment slumped to 129.655 million. This represented a further 14.572 drop below the trendline, which by February 2010 stood at 157.193 million.
At 138.463 million in May 2014, non-farm payroll employment at long last surpasses the pre-Great recession peak. However, the long-term trendline of employment was 169.888 million as of last month. This gap of 31.425 million between the trend and the actual levels indicates yet a further 3.985 million widening of the differential between February 2010 and May 2014.
The entire 14-1/4 years between January 2000 and May 2014 divides conceptually into three periods.
- In the first eight years to the pre-Great Recession peak in actual employment, jobs failed to match trend by 135K per month.
- In the 25-month span from January 2008 to January 2010, actual jobs relative to trend growth declined by 583K per month.
- Over the last 52 reported months, jobs on average still grew 75K less per month than their long-term trend increase.
However, during the four months between January and May of this year, the annualized jobs growth of 2.12% has actually exceeded the long-term trend of 1.84%. If this news continues, the U.S. jobs gap will finally start to narrow. The differential is just too big now for anybody to see it disappear entirely during their remaining lifetime.
Copyright 2014, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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