Here's Why There Won't Be A V-Shaped Recovery In Jobs

U.S. Payrolls By Month

After Friday’s surprising jobs report, there has been a glimmer of hope that the U.S. won’t be stuck with 10% unemployment for years.

Perhaps, like the stock market, the job market will come roaring right back, in a terrific v-shaped recovery.

Unlikely, says Asha Bangalore of Northern Trust.

Since the peak, Asha says, the recession has wiped out 7.2 million full-time jobs.  2 million of those jobs were in the auto and real-estate industries, both of which have been semi-permanently downsized.

At the same time, the length of the work-week has dropped to a record low, and the number of folks working part-time because they can’t find full-time work has soared.  As new demand kicks in, employers will likely start by hiring temporary workers and giving part-time employees more work.  This will absorb a lot of the initial slack. 

Only when the work-week has returned to normal will hiring of new full-time employees return in earnest.  This will likely keep a lid on hiring at least through 2010.

See the story in charts >

We've lost 7.2 million jobs since the recession began

But the average workweek has also tumbled, so even many of those who are working are under-employed

As a result, a near-record number of people are working part-time because they can't find full-time jobs (but the number is finally falling)

When demand picks up, as it seems like it is beginning to, employers will likely first make part-time workers full time and hire temporary first.

Source: Asha Bangalore, Northern Trust

The auto and real-estate industries have been semi-permanently downsized. Car sales are now around 11 million a year, versus 17 million two years ago

Auto industry jobs have plummeted by 800,000+, and they're below 1990 levels

If the economy improves, car sales and auto industry jobs will likely improve. But they're almost certainly not going back to 17 million a year, at least not soon.

Asha Bangalore:

At the peak, employment in the production and sales of motor vehicles was 3.174 million in 2000
(see chart). As of November, the same auto industry employment metric shows 2.327 million
on payrolls. This is loss of roughly 847,000 jobs or a 27% reduction of payroll employment
related to auto production and sales. Of this, approximately 533,000 jobs have been lost since the
recession commenced in December 2007 (62% of the total decline in jobs since the peak).
Therefore, job retraining and the number of jobs needed to replace this loss are both daunting.

Source: Asha Bangalore, Northern Trust

We have a similar problem in the real-estate industry, although the velocity of house sales has returned to normal (temporarily?)

We have lost more than 1 million jobs in residential construction alone

Some of these will come back, but not all.

Importantly, this chart does not include jobs in real-estate sales, mortgages, and other associated sectors. The total loss of jobs in the real-estate industry has been much greater.

Asha Bangalore:

Employment in the construction of homes shows a significant setback given the magnitude of the
housing market crisis. The employment data of chart 6 include only jobs related to construction
of homes. Employment involved in the sales of homes and other housing industry related activity
is excluded, implying that chart 6 under estimates the decline in housing and housing related
employment. Sales of homes, both new and existing, were ranged 6.0-8.4 million units during
2000-2006. In the six months ended October, sales of homes average 5.7 million units (see chart
6).

Source: Asha Bangalore, Northern Trust

Now check out the full state of unemployment in the U.S. right now

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