Job Market: A Long, Difficult Road

I wonder…

When jobs are lost, are they ever really found again?

The chart below shows us that, yes, eventually these jobs are found again.

This chart tracks job losses following every major recession since 1948.

The y-axis plots the percentage of jobs lost following peak employment. The x-axis tracks the months following the peak of each recession.

You can see, to varying degrees, there are two types of job recoveries: V-shaped and U-shaped.

See larger image

The V-shaped or U-shaped recovery refers to how long it takes for the job market to recover. A V-shaped recovery is fast, quickly restoring all the jobs lost in the recession. A U-shaped recovery is slow, taking many more months to “recover.”

It’s worth noting that V-shaped recoveries likely indicate cyclical unemployment, while U-shaped recoveries are indicative of “structural” unemployment.

The recessions of 1974 and 1980 are good examples of V-shaped recoveries. In these instances, all lost jobs were regained within 10 and 15 months.

The 2001 and 2007 recessions are good examples of slow, torturous U-shaped recoveries. Following the recession of 2001, it took a record 47 months to restore the relatively shallow, 2% loss in jobs.

The 2007 recession was even worse…

First, the magnitude of job losses was the largest of any recession since World War II, at 6.5% of jobs lost.

Second, the “recovery” is taking forever.

So how much longer before all those lost jobs are recovered?

You can see from the chart that, at 25 months, the percentage of jobs lost reached 6.5%. Over the next 27 months, the percentage of jobs lost improved by 3%. This means that each month, approximately 0.1% of the lost jobs are being restored.

If this rate of change remains constant, it will take another 30-some months before all jobs lost from the 2007 recession are restored. That’s a record seven years.

This will be a long, difficult road…

If you haven’t done so already read the Survive & Prosper issue on “In a World of Creative Destruction Comes Innovation.”



Adam O’Dell

Using his perfect blend of technical and fundamental analysis, Adam uncovers investment opportunities that return the maximum profit with minimum risk.