By Walter KurtzSober Look

One way to look at the US job market is to break it up into two components: jobs generated by structurally “impaired” and “non-impaired” sectors. Credit Suisse defines structurally impaired sectors to “include real estate related industries, finance, manufacturing, and the state and local government sector.” These are the sectors that at least in part rode the “bubble” economy wave. Many of these jobs were credit dependent, with growth beyond what the economy could sustain naturally.
The chart below shows the job creation and loss of the two components. The structurally impaired sector jobs created during the period of over-capacity growth simply never returned.  The sectors were highly credit dependent and with all the deleveraging taking place, the jobs are not likely to come back any time soon (thus the definition: “structurally impaired”)

Structurally impaired and non-impaired jobs (CS)

On the other hand job growth of the non-impaired sectors has almost returned to the pre-crisis levels.

Structurally non-impaired job growth (CS)

But the “non-impaired” sector job growth by itself is insufficient to quickly get us back to the employment levels of the “bubble” era.  According to Credit Suisse, at the current rate of growth we will get there by September of 2015.  And that assumes we don’t have significant Europe-induced interruptions.  By late 2015 however the US population will be considerably larger than it was in early 2008, thus even this peak number of jobs will still mean higher unemployment.

Returning to the jobs number of the “bubble” peak (CS)

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Sober Look

Sober Look

Sober Look was founded by Walter Kurtz, a New York based hedge fund manager and credit markets specialist.

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  • goodfriend

    so….a good and a bad news at the same time

  • Grain

    Whoever made that last graph do not know what they are talking about.

    We’re still over 5 millions of jobs in the red when comparing to the 2008 peak, yes, but population growth has to be accounted for as well as the historical trend of job growth. In these last 5 years(half through the lost decade), the job market created about 6-7 million jobs in average, and that’s a conservative sum.

    Basically, we’re 11 to 12 million jobs negative so far, and if the job growth(annually, not on a single month) continues to be as sub-par as it has been so far, it will take about 10 years before we can get even the same job level we had before, and we’ll need an average of 208,000 jobs for that.

    And 208,000 jobs is the average number of jobs added during the best year in the first decade.

    Needless to say, one whole year isn’t enough. The average jobs added during a whole *decade*(which is what we’re looking at) is at 192,000, which was during the nineties. Do people think we’ll see that backdrop again, especially in the face of mountains of debt and debt deleveraging?

    Here’s a useful graph:


    Basically, the only way that the unemployment will keep trending downwards is if more and more people simply stop working alltogether and the employment/population ratio drops from the current early 80s levels to perhaps mid 70s(or even late 60s).

    A lot of women and indeed men are going to get used to welfare and being stay-at-home moms/dads.

    What we need is a massive stimulus, a Glass-Steagall-esque law, raise taxes on large companies and relieve small businesses, reform health care and withdraw the troops. Politically almost impossible but if this isn’t done, America will essentially see a long, slow grind like that of the great depression.

    Last time WWII got us out, and as someone said “I do not know what weapons will be used in WWIII but I know that in WWIV they will fight with sticks and stones”. Basically, a big global war isn’t a viable option.

  • quark

    The analysis needs to look at the baby boomer work force as a composition of the entire work force. To look at thebpopulation as a whole is analytical malpractice.

  • LRM

    Mish has some good numbers in this post


    Eventually we will know who is more correct in the stats for the employment picture!!!

    I guess it depends on where you sit & what axe needs grinding.
    Same with Recession calls. Always the question remains “Who has the best analysis?”