The Jobs lost in the Great Recession May Return... By 2018

Posted on Wednesday, January 12, 2011

The charade in the bloodied jobs market just won't quit.
That's the growing contention--strongly promoted by the White House and Wall Street--that the employment picture is on the verge of taking a decided turn for the better and that it's only a matter of time, thanks to a peppier economy and government stimulus, before the roughly 8.5 million jobs lost during the recent recession will be restored.
Friday's bum employment news--the creation of only 103,000 new jobs in December, nearly 50% lower than the generally expected 150,000--was an unmistakable sign to the contrary, namely that the folks holding such exuberant job expectations are not doing it with a full deck.
The key reason: The economy, though on the way back and gnawing away at unemployment, is by no means ready to transition into robust growth.
Nor is Corporate America, though sitting with oodles of cash on their balance sheets (about $2 trillion) in a gradually improving economy, ready to commit to more aggressive hiring on a national level. Nor, for that matter, are banks, whose death rate continues at brisk pace (157 failures in 2010, the highest number since 1992), and saddled with a lofty level of overly stated assets, especially in real estate, ready to offer an abundance of cash to would-be buyers to speed up the recovery, in turn leading to more job creations.
So it all raises some obvious questions: How long should it realistically take to recover the jobs lost during the recession and get us back to a normal unemployment rate? And what will it cost Uncle Sam to achieve such a goal?
For some thoughts, I rang up Madeline Schnapp, the economic skipper of West Coast liquidity tracker TrimTabs Research, partially owned by Goldman Sachs. Sharp, incisive, perceptive and thought-provoking, she is no stranger to my HuffPost contributions, having made a number of timely and on-the-money economic calls.
Sorry to say, her words won't be pleasing to the 14.5 million jobless Americans or the nearly 26 million job seekers, including those who've quit the work force and would like full-time employment.
For starters, Schnapp figures it will take four to seven years to recuperate all the jobs lost during the recession, which means the timetable could be as far out as 2018. She believes four is probably too optimistic, given such ongoing economic-stifling problems as high unemployment, a dead housing market, a deleveraging consumer, the financial plight of state and local governments saddled with gigantic budget gaps, meaning more layoffs and higher taxes, and a 14% jump in prices at the gas pump over the past three months, equivalent to a $60 billion tax on consumption on an annual basis.
Actually, Schnapp thinks there's a possibility that 20% to 25% of the lost jobs may never come back because of the damaging effects from the eventual collapse of the hyper-charged housing market between 2003 and 2007.
Over the past two years, the federal government has spent about $3.5 trillion in bailouts, stimulus and quantitative easing. In 2010, after almost two consecutive years of job losses, the economy generated about 1.1 million jobs. That means each job that year cost taxpayers $3.2 million.
Going forward, Schnapp estimates the economy will produce a total of 2.8 million jobs in 2010 and 2011. If that's right, each job will cost taxpayers $2 million. She further notes that if the Fed keeps printing dollars ad nauseum and the government keeps running trillion dollar-plus deficits, the total price tag to replace the 8.5 million jobs could run $13-$15 trillion.
Given her economic concerns, our worry-wart looks for a muddling-along 2011 economy, with anemic growth, say in the 2%-2.5% range. Goldman Sachs, more positive than Schnapp, recently predicted the S&P would wsind up would wind up this year at 1,500. She disagrees, looking for an uninspiring year for investors, with the index trading in a narrow range of 1,050-1,100 on the low side and 1,300 on the high side.
Another 2011 thought from Schnapp: She expects another round of quantitative easing or QE3. No, not to further fuel the economy, but to provide bailout money for insolvent states, such as California, Illinois and New Jersey. "They say it can't happen, but we've heard that before," she says. "I guess deficits work, until you run out of other people's money."

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