Prospects for Job Growth

My latest project, now in the hands of the editors, is called 2011 Career Plan. The idea is that as America moves out of recession, 2011 is a good time for your next career move, so make a plan and get moving! Of course, this is premised on the assumptions that America will move out of recession and that job prospects will improve in 2011 to the point where more people than now will consider career moves. How can I be sure the outlook is so promising?

I can’t be sure. I can offer only my best guess based on the opinions of economists, and economists differ about which direction the economy will take in the near future. Some predict a V-shaped recession, which means we are bouncing back quickly. Some round the bottom of the curve to make a U shape, expecting that the recovery will be slow in coming. Some opt for a W, expecting that the initial recovery will fail and be followed by a second downturn (as happened in the Great Depression). The most pessimistic expect an L shape, meaning that the economy will remain depressed for a very long time, a "lost decade" such as Japan experienced in the 1990s.

Whichever of these shapes the economy ultimately follows, we can at least take comfort from the fact that the curve has stopped pointing downward. The greatest loss of jobs in any single month, almost 800,000, in fact happened over a year ago, in January 2009. The next month, job losses were closer to 700,000, and by January 2010 the losses were considerably under 100,000. That was still more jobs lost than gained, but last month (March 2010) we had a net gain of 162,000 jobs, of which only 48,000 were for Census workers.

The return to growth is welcome, but not yet impressive. The economy needs to add a bit more than 100,000 jobs each month just to keep pace with the number of new grads, immigrants, and other people entering the workforce. And it needs a much faster pace of added jobs to create work for the millions idled by the Great Recession. The fear is that we may see a repeat of what happened after the recession of 2001, when 39 months passed before employment rose back to pre-recession levels—a very stretched-out U.

So yesterday I was heartened to chance upon one very optimistic projection from an economist who believes that we will experience very strong job growth for the rest of this year. He argues that the single best predictor of job growth is growth of retail sales adjusted for inflation, otherwise known as real retail sales, and he shows several graphs that indicate a close correlation between the two kinds of growth. Of course, correlation does not always mean causation, but in this case there is logic in the idea that retail sales indicate demand for products (and probably also services), which in turn requires that businesses hire workers to meet the demand.

I remain skeptical but hope this prediction is right. In my manuscript, I made the point of focusing on the industries with the best prospects for growth, according to the projections released by the Bureau of Labor Statistics this past December. I wrote, "As the economy heats up, it doesn’t work like an oven that browns all the biscuits at the same rate. Some industries are much hotter than others. So it makes sense for you to focus your 2011 career plan on a field that is expected to offer lots of job opportunities." Growth of employment in health care, for example, has been only slightly dented by the recession, compared to many other industries.

Let’s hope that we soon see rapid job growth. And let’s also hope for some real reform of the financial industry—limiting how much lending institutions can leverage their assets; bringing derivative trading out of the shadows; and creating a receivership authority so that failing institutions finance their own dissolution—so we don’t see a repeat of the crisis that caused the Great Recession.

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