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Obama Wars Title: U.S. Economic Recoveries Taking Ever Longer To Bring Back Jobs U.S. Economic Recoveries Taking Ever Longer To Bring Back Jobs By SCOTT STODDARD, INVESTOR'S BUSINESS DAILY Posted 06/18/2010 07:17 PM ET View Enlarged Image Job recoveries have been increasingly sluggish over the past several recessions and the current downturn looks to be the longest since at least World War II. It took 28 months for employment to return to its pre-recession peak following the 1981 downturn; 32 months after the 1990 slump; and 47 months after the 2001 recession. Today's jobs slump, already at 29 months, could last five years or more, analysts say. Employers are expected to stay cautious amid a sluggish economic recovery. "It would be strange but not inconceivable" for employment to fall short of its pre-recession peak before the next downturn, said Don Rissmiller, chief economist at Strategas Research Partners. Job losses were especially harsh in the last recession: Employment plunged as much as 6.1% from the December 2007 peak, the worst since the Great Depression. But the U.S. economy has struggled to erase even shallow job losses. In the 2001 recession and aftermath, employment never fell more than 2%, yet it took nearly four years to get back to its old highs. Stronger productivity gains in recent decades have let firms make do with less, analysts say. "Once companies are producing as much as they were prior to the recession they'll need fewer workers," said Sophia Koropeckyj, a labor economist at Moody's Economy.com. And many jobs have been lost or shifted overseas. As those secular trends have increased, so has the time for employment to recover. Rissmiller and other economists say a double-dip recession is unlikely. Yet hiring remains painfully slow. Excluding temporary hires for the 2010 Census, the economy has added about 500,000 jobs so far in 2010. The U.S. will need to add about 8 million jobs just to get back to the December 2007 peak, when the recession started. Excluding the soon-to-disappear Census jobs, employers would need to average nearly 300,000 new jobs a month for the next 27 months just to get to the pre-recession peak by the end of 2012. That prediction is "pretty optimistic," Koropeckyj said. "A lot of forecasters think it'll take longer." Optimists point out that companies cut employment much faster than output during the recession and will need to rehire many of those workers now that the economy is growing again. "They panicked. They overcut jobs," Koropeckyj said. "For that reason, they're going to have to take on workers." Employment shrank 6.1% from peak to trough in the current recession as GDP fell 3.8%. By contrast, employment shrank just 3.1% in the 1981-82 downturn, just a bit more than the 2.9% GDP contraction. However, while the 2001 jobs slump of 2% was relatively mild, it came on a scant 0.3% drop in GDP. Companies have been hiring temporary workers and increasing the work week for existing staff, leading to big productivity gains and fueling expectations that firms will soon have to boost hiring. But companies are "a little jittery" about the outlook for the economy and government regulation, said Nariman Behravesh, chief economist at IHS Global Insight. ObamaCare promises substantial costs on employers. Climate legislation, though stalled in Congress, would hike energy costs. Bush tax cuts on high earners and investment expire at year-end. Democrats in Congress also are currently trying to raise taxes on oil companies, fund managers and U.S. multinationals just to partially fund a new round of short-term spending. And with deficits expected to remain high, businesses and consumers have good reason to fear taxes will rise even further. Private-sector jobs rose just 41,000 in May, the fewest in 2010. And weekly jobless claims remain above the level that would suggest net hiring. Tight credit and sluggish demand are hampering small businesses. Construction probably won't bottom until banks clear a glut of foreclosed properties. Meanwhile, state and local governments have been cutting jobs and may keep doing so for a long time. Also, millions of the jobs lost in the recession are gone for good. A record 46% of the unemployed in May had been out of work for more than 26 weeks. Retraining 50-year-old auto workers to work in, say, health care will be a challenge. With recent data signaling slowing GDP growth and fiscal policy rapidly turning from a tail wind to a major head wind, firms may feel no need to push the button on hiring. Nevertheless, companies are sitting on mounds of cash. If the recovery stays on track despite waning stimulus, they could step up their spending on staff and equipment. "Our position is that it is a self-sustaining recovery" that will create jobs, especially among big exporters benefiting from growth in Asia and elsewhere, said John Canally, an economist at LPL Financial. Manufacturers, who cut 2.2 million jobs over two years, have added 126,000 so far in 2010. "I think you might be able to create 200,000 jobs a month" in overall employment, he said. At that pace, payrolls would return to their old high in mid-2014.
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