Employment: gauging the crisis and outlookGreg Ip, U.S. Economics Editor, The Economist

Prepared for “The Jobs Deficit: The Challenge of Putting America Back to Work” New America Foundation

Oct. 20, 2009

Worst recession by employment

Not the worst by GDP

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1948 1953 1957 1960 1969 1973 1980 1981 1990 2001 2007

GDP

Jobless claims suggest turning point

0

100000

200000

300000

400000

500000

600000

700000

22 Jan2000

20 Jan2001

19 Jan2002

18 Jan2003

17 Jan2004

15 Jan2005

14 Jan2006

13 Jan2007

12 Jan2008

10 Jan2009

Four week moving average

Signs of reviving demand for labor in construction, manufacturing

0

0.5

1

1.5

2

2.5

3

Total Construction Manufacturing

Dec-07

Apr-09

Aug-09

Source: BLS, JP Morgan Chase

Vacancy rate, %

USA now a high unemployment country

0

2

4

6

8

10

12

Canada France Germany Italy Japan UnitedKingdom

UnitedStates

2007

Latest

Unemployment rate, %

Long term unemployment may lead to hysteresis

02468

101214161820

Median duration of unemployment, weeks

Crises leave lasting damage

Source: IMF World Economic Outlook Sept 2009 p 122

A smaller future GDP than we thought

8000

10000

12000

14000

16000

18000

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

$200

5 B

N

2007 projection 2009 projection

Source: CBO 2007 & 2009 Budget & Economic Outlooks

Finance, autos & housing share of total employment

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

Jan

-90

Jan

-92

Jan

-94

Jan

-96

Jan

-98

Jan

-00

Jan

-02

Jan

-04

Jan

-06

Jan

-08

Source: Citigroup, July, 2009

Slower labor force growth

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1950-73 1974-81 1980-90 1991-2001 2002-08 2009-19

% /

year

Source: CBO Budget & Economic Outlook Aug, 2009