Between October, 2009 and April, 2010 the US economy lost 4.8 million jobs: nearly 700,000 jobs per month.  In the last three months it has lost a TOTAL of 100,000.

How and why employment will recover faster than expected.

1. The change from -700,000 jobs to zero is a major trend, indicating net job creation is imminent.  Obama’s budget forecast of 100,000 adds per month is conservative political positioning so that the real results will exceed expectations.  He and his party have an election to contest in November.
2. GDP growth was 3% in the 3^rd quarter and 5% in the 4^th quarter, accompanied by eye-popping labor force productivity numbers above 5%.  Some hiring is required to meet existing production needs.  It has begun.
3. Inventory replenishment will continue as it has in all other recoveries.
4. More than half of the stimulus money remains to work through the economy. The second stimulus package is necessary political and psychological posturing and will be too late and too little to make a material difference.
5. Construction has nowhere to go but up after 3 years of decline.  Even with ongoing foreclosures, there is pent-up demand for new housing.
6. Consumer durable goods’ spending is ready to bounce back.  Cars, washers and televisions have limited technical and acceptable status lives.
7. Businesses are ready to invest in capital goods, productivity improvements, IT systems, new channels, new products and exports.  Businesses have the resources to invest after lower than average spending since 2000.
8. 5-8% growth in China and other developing countries increases demand for US exports and raises prices for US imports.
9. Once the global recovery is underway and the extent of US monetary expansion is plain (leading to inflation), the US dollar value will fall and US exports will increase.
10. The retirement of the Baby Boomers will lead to specific hiring in sectors of high demand: health care, financial services, housing and travel.
11. The retirement of Baby Boomers will increase from 2.2M per year to 3.7M per year in the next 8 years, adding an average of 1M jobs per year.
12. The US population will continue to grow at 1% per year, leading to growth in aggregate demand of 1% per year.
13. US labor force and total factor productivity continue at high historical rates, generating the underlying added output which leads to wages, profits and rents which create the next round of aggregate demand.
14. There are long-term positive employment trends in a majority of the US industry sectors.  The US economy has continued its transformation into an information economy.  Manufacturing employment is now less than 10% of the total.  We may have found the bottom for this sector.

 

There are certainly national and global risks in the current economic climate.  However, the US economy has shown increasing resiliency in the last 60 years, recovering from recessions in spite of a variety of headwinds.  The economy has recovered during Republican and Democratic administrations, in spite of helpful and harmful national policies.  There are many reasons to believe that the current recovery will be strong.