Chad Stone is chief economist at the Center on Budget and Policy Priorities.
Last Friday's jobs report showed that the economy is moving in the right direction, with employers adding an average of 245,000 jobs a month over the past three months. That's good compared with what we've seen over most of the recovery so far, but it's well short of what we would expect to see in a truly robust recovery. Critically, we still have a long way to go to restore the labor market to good health after the devastating effects of the Great Recession.
Fortunately, we've come a long way since late 2008 and early 2009, when the economy was hemorrhaging nearly 800,000 jobs a month (see chart). In my view and that of many other analysts, including the Congressional Budget Office, the February 2009 Recovery Act played an important role in slowing those job losses and turning the economy around. We've now seen 24 straight months of private sector job creation, and job growth in the past three months has been as good as it has been so far in this recovery.
But here's the problem. We still have a large jobs deficit, and we are digging out of it only slowly. Job losses have been far more pronounced and prolonged in and coming out of the latest recession than in any of the previous three—including the severe 1981-82 recession (see chart below). Two years ago, job losses peaked at 8.7 million—a decline in payroll employment of more than 6 percent from the start of the recession in December 2007. The jobs deficit is now down to 5.3 million, but it would still take almost two years of job growth at the recent pace just to get back to square one. Moreover, with the population growing in the meantime, we would still be well short of the number of jobs needed to restore "normal" levels of employment.
The 1980s saw the last classic "V-shaped" recession and recovery, where the job losses were severe but relatively quickly reversed. In the 12 months from September 1983 to August 1984, the average pace of job creation was 408,000 jobs a month. The 1991-2001 expansion took some time to get going, but in its fastest 12-month period, from March 1994 to February 1995, job creation averaged 326,000 a month. We have not seen anything like that in this recovery. Meanwhile, the unemployment rate remains a much-too-high 8.3 percent, an unprecedented 4 out of 10 unemployed people have been looking for work for at least six months, and the share of the population with a job remains depressed at levels last seen in the mid-1980s.
Over the last four years, the economy has combined the worst features of the prior three recessions: a severe, sharp downturn like that in 1981(only worse), followed by a protracted jobs slump like those following the milder 1990-91 and 2001 recessions (only worse). Looking in the rearview mirror, the latest jobs report looks OK—at least we're heading in the right direction. But looking at the road ahead, we still face a long uphill climb, and it will take a whole string of jobs reports significantly better than February's to get us back to full employment in any reasonable period of time.