Lack of jobs stalling recovery

By Barbara Hagenbaugh
USA Today

WASHINGTON — A growing number of analysts are saying that the United States is in a "jobless recovery," an unwelcome trend that contributed to a slow-growth recovery last decade.

As in the post-recession period of the early 1990s, the unemployment rate is rising, and the number of jobs has been falling. While that was expected, analysts worry the lackluster job market will weaken an already slow recovery. And many say it will get worse before it gets better.

"It's going to be a slow process to get employment back up," says Donald Straszheim, president of Straszheim Global Advisors.

The term "jobless recovery" was coined after the 1990-91 recession. During the first five months of that recovery, 115,000 jobs were cut, a 0.1 percent drop. It was the first time since World War II that job growth didn't materialize in the months following a recession.

This time, jobs are also down 0.1 percent, or 131,000, from February to June. While an official decision has not been made, many analysts believe the recession — which began in March 2001 — ended in January.

Although payrolls rose in May and June, the rise was barely noticeable — 60,000 when 8.4 million Americans are out of work. And the government has been revising away job gains each month after receiving new data, making many economists skeptical that there were gains in the last two months at all.

"We need the economy to be generating 150,000 to 200,000 jobs a month to bring the unemployment rate down," Bear Stearns economist John Ryding says.

But many economists say those kinds of numbers are unlikely to materialize any time soon.

CEOs are gloomy about the economy, a mood that no doubt is worsening in the stock market plunge and isn't likely to put executives in a hiring frame of mind. Plus, firms have found over the last few years that they can squeeze more output out of their current workforce by working employees harder and longer.

In testimony yesterday, Federal Reserve Chairman Alan Greenspan said such productivity gains will slow "at some point." When that happens, he said, the U.S. will see a "fairly marked pickup in employment."

Even though it's unclear when that will happen, this jobless recovery likely won't be as deep as it was in the 1990s, analysts say. That time, it took two years for the job count to reach its pre-recession level.

This recession was mild, and fewer people were unemployed before the downturn started. Before last year's recession began, the unemployment rate was 4.2 percent, a full percentage point lower than it was prior to the 1990-91 recession. Thus, the labor market has a much smaller gap to fill this time around.

And some analysts even say the current labor market, while not on a tear, is being slighted.

"I don't think that when all is said and done, we're going to have the same, so-called jobless recovery that we had 10 years ago," FleetBoston Financial chief economist Wayne Ayers says. He notes that unlike in the 1990s, firms continue to secure loans, which should soon boost job creation.