JOB MARKET: ONE OPINION

The recent up tick in the financial markets may signal a turnaround for few who see the glass as half full. For those who see the glass half empty, the rapid deterioration of the job market, which has shed more than 650,000 jobs for each of the past three months, is causing hardship for individuals across all industry segments and alarm among economists.

Robert Barbera, chief economist for the research and trading firm ITG, recently described the near-record rates of employment decline as a “violent downward trajectory.”

As the chart below shows, the current job loss is striking, but this has often been the case during postwar recessions, particularly during the recessions of the 1940s. The extraordinary job loss in 1945 was the result of the transformation of the war-focused industries and the job transfers from women and teenagers to veterans returning from World War II.

Click on the chart to enlarge it

But the chart also shows some rapid rebounds of employment after the recessions. For example, the market added about 400,000 jobs each month in the year following the 1945 recession. After the recession in 1981-82, the markets rebounded and added more than 1.1 million jobs in September 1983 alone. Nearly 85 percent of these new jobs came from the service sector.

This didn’t happen during recoveries of the 1990s and after the recession of 2001-02. Economists debate the causes of these jobless recoveries. There are several popular explanations. One is that advances in technology allowed firms to operate without increasing hiring. Another is that structural changes in job markets required more time to impact the job market because workers needed to acquire new skills. A third is that some factories shifted part of their business offshore.

There is not yet any sign of the current recession coming to an end. Nor is there any indication of which pattern of recovery the job market will follow when the turnaround finally occurs.

The notes posted here are observations by Keming Liang, Research Associate at the American Institute for Economic Research.