How Long Will It Take for the Labor Market to Recover?

To state the obvious, we need to create a lot more jobs per month than we have so far. If we continue at present rates, the unemployment rate will stay constant or increase even further. Even if we duplicate the performance of the economy prior to the recession, it will take four years to reach an unemployment rate of 7%. Thus, to get out of this in a reasonable amount of time we need job creation to accelerate considerably, and it's hard to see that happening without help from Congress. Unfortunately, Congress pretends to "feel your pain," but they don't seem to really understand how hard it is for those who are struggling with unemployment -- that this is a crisis requiring immediate, agressive action -- and it's hard to imagine that Congress will give labor markets the amount of help they need. So no need to hold on to your hats, it looks like we're headed for a very slow ride:

Two more job market charts, macroblog: ...Payroll employment growth has averaged about 110,000 jobs a month since February 2010, the jobs low point associated with the crisis and recession. This growth level compares, unfavorably, with the 158,000 jobs added per month during the last jobs recovery period from August 2003 (the low point following the 2001 recession) through November 2007 (the month before the recent recession began). One hundred and ten thousand jobs a month compares favorably, however, to the 96,000 job creation pace so far this year.

Are these sorts of differences material? ...[W]ith a few assumptions, such as the presumptions that the labor force will grow at the same rate as census population projections (for the aficionados, my calculations also assume that the ratio of household employment to establishment employment is equal to its average value since January of this year), the unemployment rates associated with job growth of 158,000, 110,000, and 96,000 per month would look something like this:

(enlarge)

These paths are just suggestive, of course, but I think they tell the story. The same jobs recovery rate of the prerecession period would get the unemployment rate down below 7 percent in four years or so. But at the pace we have been going this year, things get worse, not better.