President Obama may wind up being right about the economy making progress after all. A new report from outplacement firm Challenger, Gray & Christmas says the current economic recovery started sooner and is progressing faster than the jobless recoveries that followed the previous two recessions.
Positive trends in job creation, the pace of layoffs and unemployment indicate that the job market may actually be recovering remarkably quickly considering the country has just experienced the worst economic downturn since the Great Depression.
Looking at the Bigger Trends
Although these trends may show more promise than during past recessions, the fact that the positive economic growth has recently slowed is continuing to discourage employers from hiring workers at a pace that inspires confidence in the recovery. Last week's series of disappointing economic reports, including initial jobless claims numbers that rose to 500,000 in August, has raised pessimism to levels that are hard to overcome.
"By most accounts, we are barely a year into the recovery. At this point in the previous two recoveries -- following the 1991 and 2001 recessions -- the job market was actually getting worse," says John Challenger, chief executive officer of Challenger, Gray & Christmas. "Many people are so caught up looking at the weekly and monthly numbers that they fail to look at the bigger trends, which indicate just how much the job market has improved over the last 12 months."
When it comes to job creation, Challenger says that following the 1991 and 2001 recessions, there were jobless recoveries that lasted 15 months and 19 months respectively. Using June 2009 as the presumed end of the current recession -- also known as "the Great Recession" -- Challenger's research suggests a much shorter period before jobs began reappearing. While the current downturn has also experienced a jobless recovery, Challenger says "several employment trends suggest that this jobless recovery may have lasted just six months and is now on a positive track."
Comparing Favorably With Recent Recessions
Another positive job trend shows up in Challenger's analysis of job cuts since June 2009. He points out that job cuts have averaged 56,208 in the 13 months since June of last year, and have numbered fewer than 100,000 for 14 consecutive months – a trend that hasn't been achieved since 1999-2000. By contrast, in the 13 months following the relatively mild 2001 recession, job cuts averaged 125,262 per month.
Overall, job losses have slowed significantly in the last year. Employers announced 896,675 job cuts in the first half of 2009, while in the first half of 2010 they announced a total of 297,677 reductions.
The Obama administration has been claiming to have created more than 600,000 new jobs since January -- Challenger puts the number at 654,000. In fact, the economy has seen seven consecutive months of job gains. The positive trend toward consistent job growth is encouraging because it took 21 months before the economy consistently began adding jobs after the 2001 recession.
Unemployment Rate, Though High, Is Dropping
While it's clear that more significant job gains need to occur to counteract the more than 8 million jobs that have been lost during the current recession, a number of employment-related trends have been improving. After peaking at 10.1% in October of 2009, the national unemployment rate continues to decline, dropping to 9.5% in July.
"While the unemployment rate remains historically high and the decline is not occurring fast enough for most, it definitely appears to be heading in the right direction," Challenger says. "If the economy were following the same pattern as the early 1990s recession or the 2001 recession, we would be facing another three to six months of rising unemployment."
Additionally, several jobless claims statistics have improved year-over-year, even though they may have recently taken a step in the wrong direction on a week-to-week and month-to-month basis. For instance, as of the week ended Aug. 7, there were 92,000 fewer people filing for continuing unemployment benefits than there were during the same period last year, and as of Aug. 14, the four-week moving average for initial jobless claims was 85,500 fewer than it was at the same time last year.
Suggestions of a Positive Trend
Overall, having fewer people collecting and applying for unemployment benefits than a year ago suggests a positive trend.
The report also noted that job prospects have improved as well as the number of job openings posted by employers increased in the first half of 2010, jumping to 2,937,000 postings from 2,519,000 postings listed a year ago.
"When you look at the overall trend since June 2009, everything is headed in a positive direction," Challenger says.
Positive Trends Say Recovery Stronger Than Previous Recessions