Jobs. Jobs. Jobs.
This past Labor Day was more than a celebration of the American worker. It also marked the beginning of the 2004 presidential campaign. And with the two coinciding, political posturing was everywhere. But regardless of one’s leaning, there’s good news at hand: the “jobless recovery” is about to shed that ignominious moniker and employment is poised to rise.
The latest tally shows the economy losing 1.6 million jobs during the official recession – which is dated from March to November of 2001 – and another 1.1 million since. That latter figure dwarfs losses of 340,000 after the 1990-91 recession, and the high priests responsible for dating the U.S. business cycle had to account for this historical aberration when making their latest pronouncement. In the end, they decided that output was a more important gauge for dating business cycles than employment, and output had risen long enough – and high enough – to qualify as an economic expansion.
The “problem” for job seekers, however, is that businesses have been especially proficient at getting things done without hiring workers; output grew at a 3% pace since the recession ended, but the productivity of labor climbed at almost a 5% pace. This especially strong gain in labor productivity is largely due to all of the labor-saving investments made during the 1990s, but it also reflects business skittishness about taking on new costs. After all, the past couple of years have had more than their share of unpleasant economic surprises, and the residual fear of yet another has motivated many firms to run lean. Just in case.
For a variety of reasons, however, that’s about to change. First, the economy is presently enjoying a surge in growth, with output growth likely to exceed a 5% pace during this quarter. Tax cuts and refunds, low interest rates, and rising profits are all now combining to deliver what will probably end up as the best quarter since 1999. At the same time, businesses are clearly feeling more confident in their prospects. Two-thirds of CEOs surveyed last quarter by the Conference Board, for example, said they expected a stronger economy six months ahead. Similar survey results have been posted by the National Federation of Independent Business, the Manufacturing Alliance, and the Philadelphia district of the Federal Reserve.
Even more encouraging are various indicators already in hand. Recent layoff announcements have been lower than any period since the year 2000, job vacancies have risen for six consecutive months, help-wanted advertising is up for two straight months, and hiring of temp workers has been explosive. The 122,000 temps hired between May and July, for example, portend more broadly based gains just around the corner.
And if you’re longing for political theater, fear not. With employment again on the rise, there will still be arguments over who gets credit for the rebound and who’s to blame for its delay. But be forewarned, claims for credit are unlikely to be any more accurate than accusations of fault.
Richard DeKaser is Senior Vice President and Chief Economist of National City Bank.
