Asha Bangalore of Northern Trust estimates that the economy will need to add 140,000 jobs a month next year to keep unemployment flat (let alone bring it down). Next year, the number may be a slightly lower but still high 86,000.
Because the “civilian labour force” grows about 1.2% a year (slightly slower in recovery years). (See chart above.) As a result, we need an impressive number of new jobs each month just to stay even.
The average growth of the civilian labour force in the last 20 years (1989-2008) was 1.2% and
the median also works out to be 1.2%. During the business expansion of November 2001 –
December 2007, the labour force grew at an average pace of 1.1% (median =1.1%).
For a steady unemployment rate, the rate of increase in employment should match the rate of
growth of the labour force. Based on the average growth of the labour force in the last 20 years, it
appears that roughly 140,000 jobs have to be created each month in 2010 to meet the increase in
the labour force. We computed this number by using the level of employment in the household
survey for November 2009 (138.502 million) as the starting point and raised the reading by 1.2%
(growth of the labour force). [Monthly increase in employment = 138.502 * 1.012=140.164,
(140.164-138.502)/12 = 138,502 jobs per month].
The labour force of the nation has recorded gains during the entire post-war period, with the exception of 1951. Data from the first eleven months of 2009 suggest that the labour force most likely held steady in 2009. The labour force typically grows at a sluggish pace compared with the historical average in the first year of an economic recovery (see chart 1), which leads us to
consider a slightly lower growth rate for 2010. By implication, the prediction of the necessary
increase in employment to match the growth of the labour force will be smaller than our estimate
of approximately 140,000 per month. Considering a 0.75% increase in the growth of the labour
force (one standard deviation below the 1.2% growth rate) would roughly require 86,600 jobs per
month. The main result of this exercise is that employment has to increase roughly 86,600 each
month in order for the unemployment rate to hold steady in the near term and a decline in the
jobless rate would entail a much larger gain.
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