While we're getting more and more signs that an honest-to-goodness economic recovery might be in the offing, one particularly stubborn segment of the economy continues to cast a lingering shadow: the labor market. Today's employment report did show yet another moderation in the pace of job losses, but we have little reason to celebrate month-to-month net declines of more than 200,000 payrolls. Measuring the cumulative job losses observed to date in percentage terms shows just how deep this recession has been for the labor market.
The NBER shows that the U.S. has experienced 11 recessions in the post-WWII era, and only the one immediately following the WWII saw larger job losses in percentage terms (see graph). The obvious difference between now and then is the labor market improved much more quickly back in '48, due in part to a difference in industrial composition (manufacturing vs. services). Indeed, the hallmark of the past few business cycles has been the incredible length of time it takes before total payrolls reach their previous peak. Even as job losses continue to abate over the next few months and job growth actually returns some time in 2010, it could be 2013 before we see payrolls return to levels observed at the end of 2007.