Long road ahead

The economy added 151,000 jobs today, twice the consensus forecast. Relative to the experience since December 2007, when the recession officially got under way, that is great news. But, we have dug ourselves into a very deep hole and the potential labor force continues to grow every month as the population grows.

As Tessa Conroy and I pointed out in a CEPR report (pdf) this summer, even if the economy were to create jobs at a rate of 166,000 per month –the job creation rate in the weak expansion of the 2000s and about 10 percent faster than today’s number– we would not return to the December 2007 employment level until March 2014 and we wouldn’t return to the December 2007 unemployment rate until 2021.

Employment path, 2000s growth rate, 2007-2014

Source: CEPR, 2010.

The unchanged unemployment rate today –at 9.6 percent, where it has basically been since May– is a stark reminder that we need high and sustained job creation to bring the unemployment rate down.

UPDATE 11/05/10: Mark Thoma, Paul Krugman, and EPI’s Heidi Shierholz have a similar take.

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