More than six years later, we’re just about back to the starting point.
If the employment numbers released Friday show an addition of 113,000 jobs or more in May, the U.S. economy will have finally regained all the jobs lost during the recession and begun to head toward new peaks.
In January 2008, total U.S employment peaked at 138,365,000. From there, it drifted down gradually for a few months, then began to plummet as the recession intensified, as the following chart shows.
Employment bottomed out in early 2010, with a total loss of about 8.7 million jobs. Those jobs disappeared in just two years, and it has since taken more than four years to get back near the prior peak. With economists predicting employers created about 215,00 jobs in May — more than enough to reach the new high — it will have taken 77 months, or roughly six and a half years, for the job market to recover from the recession.
President Obama and his fellow Democrats can clearly use some good economic news heading into this year’s midterm elections. Voters continue to say jobs and the economy are their biggest concerns. The unemployment rate, now 6.3%, has been falling steadily for nearly four years, yet many workers today have jobs that pay less than they used to earn. And a majority of Americans still feel the nation is on the wrong track, which could threaten Democrats’ control of the Senate in November and flip control of the entire Congress to Republicans.
The weak job market is much more than a political problem, however, as the following table shows. Recessions used to be fairly short, with employment bouncing back quickly. But the latest recession involved the most job cuts since the Great Depression, and the subsequent recovery has taken the longest to restore the jobs axed during the recession. The number of jobs lost from 2008 to 2010, for instance, was more than twice the number lost during the steep, back-to-back recessions of the early 1980s, combined. And the latest jobs recovery has taken more than twice as long as it did back then.
Employment has lagged because many companies simply don’t need as many workers as they used to. The so-called Great Recession hit at a time when many U.S. firms had already “offshored” work to other countries, where it is much cheaper to produce goods and even perform some white-collar jobs. Digital technology, meanwhile, has allowed firms to substitute computers and other machines for humans at an unprecedented pace, further cutting the need for U.S. workers. Those two trends help explain why “jobless” recoveries seem to have become the norm.
In other ways, the economy is still fairly far behind where it used to be. The U.S. population has grown, of course, during the same period of time the level of employment flatlined. A larger population working the same number of jobs as in early 2008 means fewer adults are working. This is apparent in the labor-force participation rate, which has dropped from 66% when the recession started to 62.8% now. A shrinking percentage of working adults means the economy will grow more slowly.
Another problem is weak earnings among those who do have jobs. Median household income today is about $53,000, according to Sentier Research, which is 4.2% lower than at the start of the recession and 5.9% lower than at the end. Those numbers are adjusted for inflation, so they clearly show the typical family is, in fact, still falling behind, even though employment is back to pre-recession levels.
Still, by the time of the November midterms, Obama and his fellow Democrats will probably be able to claim the economy has created 6 million jobs since Obama took office — roughly 1 million during each year of the president's tenure. Ten million would be better, as would rising pay for the middle class. But even the president has to do more with less these days.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.