How Much Longer Until We're Back to 5% Unemployment?

We've made decent progress rebuilding jobs in the last four years. Since the recession ended in June 2009, the economy has added 5.5 million jobs, or about three-quarters of those lost to the Great Recession.

But the economy needs a certain number of new jobs every month just to keep up with population growth and new entrants in the labor force. That's why the unemployment rate can fall much slower than the rate at which new jobs are being created. (This is also influenced by demographic and education trends. More on that here.)

The Federal Reserve Bank of Atlanta has a nifty calculator that lets you see how long it will take for the unemployment rate to return to a given level at a given level of jobs growth. At various levels of monthly jobs growth, here's how long it will take to return to 5% unemployment:

Lots and lots and lots of time.

Keep in mind, the unemployment rate is one of the least reliable measures of the health of the labor market that we have. In the short run, we don't really know if it going up or down is a good or bad sign, since there are lots of things that can skew the results, such as people giving up looking for work. It also doesn't distinguish between the quality of jobs -- say, the level of pay, or the number of hours being offered. 

Here's another way to look at it. This chart, from the Federal Reserve and the blog Calculated Risk, shows our jobs recovery compared with other severe financial crises:

While we didn't come close to the carnage of the Great Depression in depth, it's possible that our current jobs recovery will match the 1930s in duration.

Here's one more chart from Calculated Risk, comparing this jobs recovery to recent recessions:

The deeper the downturn, the deeper the scars. And this downturn was deep. Even the most bullish forecasts put us on track for the worst jobs recovery since the Great Depression. 

For more on the economy, check out my report, "Everything You Need to Know About the National Debt." It walks you through step-by-step explanations about how the government spends your money, where it gets tax revenue from, the future of spending, and what a $16 trillion debt means for our future. Click here to read it. 


Read/Post Comments (4) | Recommend This Article (8)

Comments from our Foolish Readers

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  • Report this Comment On August 05, 2013, at 1:22 PM, kyleleeh wrote:

    maybe it's just my browser, but none of your charts are visible.

  • Report this Comment On August 05, 2013, at 2:30 PM, SkepikI wrote:

    Morgan- This very interesting article full of fascinating charts could be much more interesting...or maybe a good lead into another article examining the reliability of the underlying statistics and what we have learned about trends and why the (flawed?) statistics show declining labor participation.

    I used your link to return to your October 2012 article <more on that here> para 2. That whole series and THE COMMENTARY was very interesting to me and made me wonder what we might have learned and what trend appears almost a year later.

    Anecdotal evidence is always? more suspect than official government statistics ;-) but when mine diverges from those statistics I get this persistent itch that it is telling me something important. worth some investigation and a follow on article I reckon eh?

  • Report this Comment On August 06, 2013, at 8:26 AM, wvowell wrote:

    This article was a waste of time. There is nothing in it that is significant or beneficial.

    The unemployment number today can not be compared to unemployment numbers of past years because OBAMA changed the calculation. This would be something you should talk about and explain.

    It is a joke if you believe we have a real solid recovery going on. WE DON'T!!

    We have no recovery in manufacturing jobs. This is what should be talked about.

    I really like MOTLEY FOOL but there are a lot of you that seems to want to support the Socialist direction we are headed.

  • Report this Comment On August 06, 2013, at 10:59 AM, SkepikI wrote:

    ^ even if the numbers are unreliable and suspect, the charts showing the trend are at least worthwhile. So I think you are wrong about that much at least. Can one analyze the significance of a .2 or even a . 5% change month to month? umm NO. And that's why I suggested to Morgan a follow on to see if there isnt some very useful analysis instead of somewhat interesting and useful...

    Early on one of my best Engineering profs trained me (with some difficulty I might add) to be very curious and critical of things presented as data that are not. He contended, though that there is as much to learn from identifying variables presumed to have relationships that DONT have relationships as you can learn from those that actually correlate.

    The best example I can give you is the scads of "data" really just random numbers, that correlate not at all with investor returns. And the realization that so many "investors" (i use the term loosely) rely on these non-correlating "data" to pick investments... a REALLY useful nugget of wisdom..or ha "non-information"

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