Job Destruction and Unemployment

The traditional concept most people have of recessions is businesses lay people off with the intention of hiring them back when the economy turns. However, this concept overlooks the possibility of job destruction -- that is, people were laid off from jobs that were subsequently destroyed, implying those laid-off won't be rehired. One of the reasons we are experiencing prolonged, high unemployment is the jobs from which people were laid-off aren't coming back.

First, here is a chart of total non-farm employment:

According to the above chart, employment reached its peak in January, 2007 when there were 137,998 jobs. In January 2010 there were 129,246 jobs, meaning the economy lost a total of 8,750,000 jobs during the recession.

The above chart shows total construction jobs, which peaked in January 2007 at 7,718,000 and are currently at 5,514,000, for a total loss of 2,204,000 (the figure was slightly higher in January 2010, but not by much). Considering these jobs were created by a housing bubble that isn't coming back, its fair to say these jobs are at minimum highly questionable in their long-term viability.


The above chart shows total manufacturing employment in the US. This figure was 13,728,000 in January of 2008, produced a reading of 11,465,000 in January of 20110 and currently stands at 11,667,000 for a loss of 2,061,000. Considering the increase we've seen in productivity gains over the last 25+ years, these jobs won't be coming back either.

Simply looking at these two areas of job growth, we see that nearly 50% of the jobs lost are in areas where we can expect (at best) extremely paltry job growth. And this is before we factor in the professional jobs lost related to the housing market (mortgage brokers, realtors, architects, inspectors etc..). In short, a little more than a simple majority of jobs lost during the recession are in economic areas where we won't see any meaningful job growth going forward.