This Will Be a Long, Slow Road

I wonder… when jobs are lost, are they ever found?

The chart below leads us to the answer: “eventually.”

This chart tracks job losses following every major recession since 1948. The y-axis plots the percentage of jobs lost following peak employment. The x-axis tracks the months following the peak of each recession.

You can see, to varying degrees, there are two types of job recoveries: V-shaped and U-shaped.

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The type of recovery – V-shaped or U-shaped – refers to the length of time it takes for the job market to recover. A V-shaped recovery is fast, quickly restoring all the jobs that were lost due to the recession. A U-shaped recovery is slow, taking many more months.

It’s worth noting that V-shaped recoveries likely indicate cyclical unemployment, while U-shaped recoveries are indicative of “structural” unemployment.

The recessions of 1980 and 1974 are good examples of V-shaped recoveries. In these instances, all lost jobs were regained within 10 and 15 months, respectively.

The 2001 and 2007 recessions are good examples of slow, torturous U-shaped recoveries. Following the recession of 2001, it took a record 47 months to restore the relatively shallow, 2% loss in jobs.

The 2007 recession was even worse. First, the magnitude was the largest of any recession since World War II, at 6.5% of jobs lost.

Second, the “recovery” is taking forever.

Let’s quickly estimate when all lost jobs will be restored. You can see from the chart that, at 25 months, the percentage of jobs lost reached 6.5%. Over the next 27 months (through present day), the percentage of jobs lost improved by 3%. This means that each month, approximately 0.1% of the lost jobs are being restored.

If this rate of change remains constant, it will take another 32 months from today before all jobs lost from the 2007 recession are restored. In total, it will take a record seven years to restore all lost jobs.

This will be a long, slow road…

If you haven’t done so already read the Survive & Prosper issue on “The Latest Employment Report Highlights Government’s Stastitical Lies“.

 

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Categories: Economy

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.