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News : US Economy Last Updated: Oct 12, 2010 - 9:27:57 AM


US Economy: It may take 12 years for employment to return to pre-recession level based on average jobs growth in the 2000s
By Finfacts Team
Oct 11, 2010 - 4:18:29 AM

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Source: Brookings Institution

US Economy: Economists at the Brookings Institution think-tank in Washington DC, said on Friday that it may take 12 years for American employment to return to the pre-recession level based on average jobs growth in the 2000s.

Michael Greenstone, director, The Hamilton Project, a program within the Brookings Institution  focusing on long-term growth, which is named after the first Treasury secretary Alexander Hamilton, together with a colleague, Adam Looney, issued revised estimates of the 'jobs gap'  -- the number of jobs that needs to be created for the economy to return to pre-recession employment levels and to absorb the 125,000 new entrants to the labour force each month.

On Friday, the US Bureau of Labor Statistics reported that the US lost 95,000 in September, private-sector payroll employment continued to trend up modestly at 64,000 while the public sector shed 159,000 including 77,00 temporary census workers. The unemployment rate was unchanged at 9.6% and the broad measure of unemployment rose to 17.1%.

Based on the September unemployment numbers, the Brookings' economists estimated the job gap grew to 11.9 million jobs, widening for the fourth month in a row.

The graph above shows how long it will take to fill the job gap at different rates of job creation. The economists said that if the economy adds about 208,000 jobs per month (the average monthly rate for the best year of job creation in the 2000s) then it will take almost 12 years to close the job gap. At a more optimistic rate of 321,000 jobs per month (the average monthly rate for the best year of the 1990s) the economy will reach pre-recession employment levels only after five years.

The economists also warned that threatening the core of the American Dream, a rising number of communities across the nation confront the permanent loss of industries, a glut of empty homes, and high rates of unemployed but able workers. They say while history suggests that most communities will bounce back somewhat quickly from recessions and other economic shocks, some do not. The time necessary for a complete recovery may be measured in decades for these distressed communities.

Michael Greenstone and Adam Looney cite research they have done on what happened to some of the hardest hit counties from the 1980-82 recession, which was the deepest recession in the last several decades. They say that even after the US economy had recovered from that economic shock, the 20% of counties that were hit hardest by the recession experienced smaller increases in their employment-to-population ratios than the rest of the county and slower growth in income per capita for decades to follow, underscoring the persistence of these employment problems.

President Barack Obama speaks about the latest jobs report and the economy, from the Ernest Maier Block Factory in Bladensburg, Md:

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