Job losses and Recovery

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Friday May 08, 2009 · 6:42 AM PDT

2009/05/08 · 06:42

The BLS reported this morning that in April the economy shed another 539,000 jobs. The U3 unemployment rate also increased to 8.9%. This is a .4% increase from March, and is what I expected.

This is one of those cases where "less awful" actually ought to give rise to some hope. Before Black September, when we had a shallow recession confined to Wall Street and housing-related trades, the worst month for payroll loss was (- 175,000). By November the loss was (- 597,000), and from December through March losses were clustered near (- 700,000) a month!.

April's payroll loss of -539,000 is ~140,000 less than the last 4 months. If this new trend continues for another 3 months, payroll losses will vanish and the economy might actually begin to add jobs by August.

Way back at the beginning of this year, in my conclusion to looking at Economic Indicators of the Roaring Twenties and the Great Depression, I wrote that under an optimistic scenario, the Recession might bottom and a Recovery begin in about July. Nearly all of the reports since then have comported with the optimistic scenario (real residential investment being the exception). It now looks very likely that the Recession will indeed bottom imminently.

I hasten to point out that the economic situation for average Americans will continue to stink. But it will stink more like April 1933 than February 1933 -- in other words, the trend will be up not down. I also suspect this will be another "jobless recovery" where the unemployment rate continues to climb over 10% and stays there for several years. And I am also very worried that the fundamental problems in the American economy have been elided and that a "W" shaped recession a la 1979-82 may be in store, where a brief recovery gives way to an even deeper Recession Act II in a year or two.

UPDATE: Check out the analysis this morning at Calculated Risk. The second graph (diffusion index) has suddenly turned up, exactly as it did at the end of the 1991 and 2001 recessioins. The first graph is what gives me the willies: if we have a "jobless recovery" like the last two recoveries, that line is going to look just absolutely awful for several more years.

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Job losses and Recovery

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