Lost decade for private jobs in the US?

In continuation to the posts here and here about the era of jobless growth in the US economy, the latest unemployment figures of reveals that the net private sector job creation for decade from July 1999 to July 2009 was virtually zero (an actual annual growth rate of 0.01% for the ten year period)!



While the traditional engines like manufacturing shed jobs at an alarming annual rate of 3.7% and even professional and business services grew at an anemic 0.4%, it was left to governments - federal and states - and education and health care sectors to keep the economy and labor force falling off a cliff. As Floyd Norris claims, this may be the latest indicator that manufacturing has ceased to be a major employer in the US economy.

Roger Lowenstein points to some interesting statistics and anecdotes that lends credence to the jobless growth theory - at the end of the Clinton era companies that were opening or expanding operations added nearly 8 workers for every 100 already on the payroll, this dropped to 7 per 100 during the recession of 2001, it then stayed there even after the recession ended, and has now fallen to 6 per 100 in the current recession; the percentage of adults who are working has fallen from 64 at the end of the Clinton era to only 59.5 now; workweek has shrunk to its lowest ever of 33 hours; mobility is at an all-time recorded low; firms are not hoarding labor (or in effect stockpiling them for better days) as was the practice in previous recessions, but are laying off all redundant labor in expectation of a long drawn out weakness.

Meanwhile, the labor data for July 2009 appeared to confirm the increasing belief that the worst of the recession may be over, as only 247,000 jobs were eliminated in July, the lowest decline since last August. The rising unemployment rate actually ticked down, to 9.4% from 9.5% in June, albeit mainly because so many people dropped out of the hunt for work, ceasing to list themselves as unemployed. This follows second quarter GDP growth data which revealed that the overall economy contracted at an annual rate of only 1 percent, vastly better than the fall and winter months.



Though the number of hours worked in a week rose by one-tenth to 33.1 hours, halting a lengthy decline, 14.5 million people are currently unemployed or been out of work for 27 weeks or more, the highest ever. A broader measure of the unemployment, which includes people too discouraged to look for work or forced to work only part time, slipped to 16.3% from its peak of 16.5% in June.

Further, the share of adults with jobs actually fell to 59.4% from 59.5%. Till date, 6.7 million jobs have disappeared since the recession began in December 2007, with manufacturers accounting for nearly one-third of the loss. But the unemployment rate will remain a concern for a long time since jobs will have to be created at the rate of atleast 100,000 every month just to keep up with the net additions.

Update 1
Paul Krugman explains how unemployment fell even as the economy is losing jobs.

Update 2
Krugman draws from the recessions of 1981-82 and 2001 to show how joblosses continue during recovery.

Update 3
The first decade of the new millennium has been a lost decade for private jobs in the US - in October, 2009 private sector companies employed 108.401 million U.S. workers, a million fewer than in October 1999, when they employed 109.487 million. Government has produced an additional two million jobs during this period. There are two possible reasons for the private sector jobs drought - the recessions of 2001 and the current one, and the rise in productivity growth that has meant that firms are producing more with fewer workers.