The Good Old Days of Employment

I thank my readers for voting in the unemployment poll--where we ask when do you think the US will return to a 5% rate of unemployment--just as we enjoyed recently in 2007. Here are your responses.

Half (47%) of you concur with the Advance Realty & Rutgers assessment. That gets us back to a 5% unemployment rate in eight years from now, in 2017. You might re-read my article from October 12.

24% of you think it's going to take even longer!!!

14% side with Christina Romer's work. She represents the current administration as chair of the Council of Economic Advisors. Several months ago they estimated recovery in 2014. See my January 21 article.


10% would like to think we're going to have a "jobs" recovery (as opposed to "jobless"), and get back to 5% unemployment just as we did during the downturn from 2001.

And 5% think the US will never get back to 5% employment. Yikes! Never back to nearly "full" employment, as we enjoyed just a couple years ago.

OK, so much for opinion. Now let's think our way through this problem, courtesy of John Mauldin, president of Millennium Wave Advisors. I have followed his writings for a decade. Each week he publishes thoughtful analysis. He has been heard on CNBC, Bloomberg and many radio shows across the country.


Mauldin estimates that we need about 15 million new jobs over the next five years to get to a 5% unemployment rate.

That works out to needing 125,000 new jobs each month to handle new workers coming into the market (which comes to a total of 7.5 million over five years), plus the 8 million and rising jobs we’ve lost. It amounts to 250,000 new jobs a month every month for five years. And we are still losing more than that number a month.

The chart shows the employment figures for the last ten years. Only once, in 1999, did we actually add over 250,000 jobs a month for a whole year.


Mauldin then goes to work with more plausible assumptions for his analysis of a recovery in the jobs market.

• Job losses are likely to continue for a minimum of another year.

• Then job gains start, they will be very slow at first, then pick up.

• An extremely generous monthly job gain stat over the course of the year would be 150,000 jobs.

• A falling participation rate (boomers retiring) will continue to mask reported unemployment.

• Starting in 2013 the labor pool will start decreasing because of Boomer demographics.

• The noninstitutional population will rise by 2.5 million workers a year.

Overall, this assumes there is no double-dip recession and jobs roughly rise along the same lines as the last recovery.

Here is a graph of his first scenario:


As Mauldin says in his article, Pessimistic? Mainstream and usually very optimistic Mark Zandi of www.economy.com predicted this week that unemployment would rise to 11% by the middle of next year, right in line with this scenario. Also note that total jobs rise by 14 million over ten years. Hardly doom and gloom. Again, Boomers all retire on time and there is no double-dip recession.

In Mauldin's second scenario, he asks, What would it take to get back to 5% unemployment by 2020? He assumed no recessions for the next ten years, and 2 million new jobs a year after 2011 (starting off with almost 1.5 million jobs in 2011). Of course, we have never done that, but let’s be optimistic.


Mauldin asks, Want to get to 5% within five years? Add 3 million jobs a year starting now. With no housing recovery, a smaller auto industry, and financial firms getting leaner.

Mauldin's final thoughts are:

12% unemployment is horrendous by American standards. But Spain is now at 20%, and much of Europe has been in the 10% range for years.

Americans are not used to the concept of 12% unemployment or 10% rates for extended periods. That is going to cause a serious backlash across the political spectrum. Couple that with the discomfort over $1.5 trillion deficits and there could be some serious political changes in the coming years. I think the message will be more anti-incumbent than one party or the other.

Third, the only way out of this morass is to create an environment where small business can thrive.

Thank you for participating in my poll. Now you have some basis for understanding what the US is up against--and how this may play out in your life and the lives of Americans over the coming years.

Furthermore, from other, related blog articles, I hope you gain a sense of what could work and what is counter-productive to creating jobs...so you have can keep a more informed tally on what our government leaders are proposing, and whether those solutions have a chance of working.