Anatomy of a Recovery

With the recession seemingly over, what will the job recovery look like?

By Dave Senf

Just as no two recessions are alike, no two job recoveries are alike. The job rebound this time around is expected by most analysts to be slow in arriving and subdued even under the recently upgraded GDP forecasts. Unlike other recent deep recessions, this recession is intertwined with a financial bubble that has spread credit woes across all sectors of the economy that may linger for years. Downturns caused by bursting bubbles are notorious for generating subpar recoveries. Figure 1 displays Minnesota’s wage and salary employment changes during recent recessions and recoveries.

The most optimistic job rebound scenario mimics the robust job recovery after the double dip recession in the early 1980s. In that scenario, Minnesota regains the 132,000 payroll jobs lost between December 2007 and September 2009 with sustained job growth starting in the fourth quarter of 2009. The second scenario is a jobless rebound that copies the state’s job growth performance after the 2001 recession with no job growth for another two years. It takes eight years under this alarming scenario for Minnesota to regain its pre-recession employment level. That would be twice as long as any other job recovery. Figure 2 provides three possible job rebound tracks for Minnesota over the next few years.

A third track is the Global Insight scenario, which is the most likely and is based on Minnesota’s job growth over the next few years tracking the U.S. job growth forecasted in early October 2009 by economists at Global Insight Inc., a national forecasting firm. (U.S. economic forecasts by Global Insight are the starting point for the Minn. Department of Finance’s budget forecast.) Under this scenario, job losses will continue through the first quarter of this year before hiring finally picks up. The pre-recession employment level will be reached in late 2012 or nearly five years after the deepest, longest and broadest recession in six decades commenced, and more than three years after it ended.

Dave Senf is a labor market analyst with the Minnesota Department of Employment and Economic Development (DEED). Source: Economic Trends Magazine, December 2009

The complete article is available at
http://www.positivelyminnesota.com/ Data_Publications/Economic_Trends_Magazine/ December_2009_Edition/Anatomy_of_a_Recovery.aspx