The Long Road to Recovering Employment

Today the Federal Open Market Committee released a statement that pretty much summarized what most economic indicators are pointing toward with regard to the economic recovery.  More specifically, the part I am referring to is:

Information received since the Federal Open Market Committee met in March indicates that the economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually.  Household spending and business investment in equipment and software continue to expand.  However, investment in nonresidential structures is still weak, and the housing sector continues to be depressed.  Commodity prices have risen significantly since last summer, and concerns about global supplies of crude oil have contributed to a further increase in oil prices since the Committee met in March.  Inflation has picked up in recent months, but longer-term inflation expectations have remained stable and measures of underlying inflation are still subdued.

Personally, I think the only economic indicators that reflect a recovered economy are the employment indicators.  After all, who gives a damn about increases in household spending and business investment if people don’t’ have jobs.  Just the other day I was driving and my oh so sweet-cheeks girlfriend says the economy is recovering, using PricewaterhouseCoopers’s (which is where she interns, bless her little heart) shopping spree for new employees as an example.  She was probably referring to this.   So, the only words I was really only concerned about in that statement were, “overall conditions in the labor market are improving.”  Unfortunately, the employment is nowhere near recovered and probably won’t be for a while.  But what exactly constitutes an employment recovery?

Data from St. Louis Federal Reserve (Click to Enlarge)

Take a look at the graph above (which took me a bunch of fucking code to make, so fucking like it!).  Some people may disagree, but my version of an employment recovery would be non-farm private payroll employment equaling its hypothetical level at any given time had there been no recession.  So how did I determine that hypothetical level?  First off, I determined that hypothetical level using a simple linear relationship with data running from September 2003 to January 2008, separated in months.  I specifically chose that time frame because those were the boom years right before the recession hit and private payroll employment hit an inflection point and then started heading south.  This is key because As of March 2011, the hypothetical level of private payroll employment we should be at is at over 121 million.  However, the actual level of private payroll employment as of March 2011 was only a little over 108 million.  That’s a gap of over 13 million jobs that need to be recovered, which will take years and years and years. So, going back to what my girlfriend said about PwC hiring; who gives a fuck!?!?!?!?  Companies hiring new employees does not mean there is a meaningful economic recovery! The problem is that they aren’t hiring enough employees to make up for the lost time when labor wasn’t being hired.   Now there’s a combined glut of labor that was employed, but is now unemployed, and labor that was never hired when they should have been (like retard kids out of college).

Congress better reconsider extending those unemployment benefits and Ben Bernanke better keep those interest rates down!