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Unemployment Projections Through 2020


It ain't pretty any which way you look at it.

Inquiring minds are interested in figuring out how long it might take to get back to "full employment" defined as 5%.

John Mauldin touched upon this theme in Unemployment: Welcome to the New Normal.

Mauldin's analysis stopped short of making actual projections as to when full employment would return, or the detailed path it would take to get there year by year. However, I thank him for providing a nice starting point for discussion.

In Scarred Job Market Expected to Weigh on Economy, the Wall Street Journal offers this look at how long it would take to return to employment levels before the start of the recession. Please consider the long road back:

Click to enlarge

The Wall Street Journal states:

On average, the economists don't expect unemployment to fall below 6% until 2013...

On average the economists -- not all of whom answered every question -- expect the unemployment rate to peak at 10.2% in February. But even once the employment situation stops getting worse, economists expect recovery to come slowly. "It could take until 2014-15 before we see a 5% handle on unemployment again," said Diane Swonk at Mesirow Financial.

6% by 2013?!

5% by 2015?!


Mapping Unemployment

To map unemployment projections year-by-year from now through 2020 there are a huge number of variables to take into consideration.

Factors Affecting Unemployment Projections

  • Current Hiring Trends
  • Demographics
  • Working Age Population Growth Projections
  • Boomer Retirements
  • Participation Rate
  • Part-Time Employment
  • Drivers For Jobs
  • Housing
  • Commercial Real Estate
  • Global Wage Arbitrage
  • Outsourcing
  • Double Dip Recession
  • Productivity
  • Manufacturing

Let's start our analysis with a look at monthly job growth trends from 1999 through 2009. John Mauldin posted the following chart, I filled in averages and outlined previous recession periods in blue.

Monthly Job Growth 1999-2009

The chart is courtesy of the Bureau of Labor Statistics. Annotations are by me, numbers are in thousands.

The areas in deep blue mark recessions. The last recession ended in November 2001. The economy shed jobs for the next 21 months. Is there any reason for it to be different this time?

  • At the height of the Internet bubble, with a nonsensical Y2K scare on top of that, the economy managed to gain 264,000 jobs a month.

  • At the height of the housing bubble in 2005, the economy added 212,000 jobs a month.

  • At the height of the commercial real-estate bubble with massive store expansion, the economy added somewhere between 96,000 and 178,000 jobs per month, depending on where you mark the peak.
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