A ‘jobless recovery’ seems like the worst kind of oxymoron.
How can the U.S. economy hope to recover if that recovery doesn’t include replacing some of the 7 million jobs lost in the past two years as the country has struggled through one of the worst economic downturns since the Great Depression?
In the first place, the term is more of a misnomer than an oxymoron.
“There will be hiring but it will be hesitant,” explained Gus Faucher, the director of macroeconomics for Moody’s Economy.com
It’s really fairly simple, according to Faucher: gross domestic product, or the total market value of all goods and services produced in the U.S., is starting to grow and with it the U.S. economy.
But businesses, badly weakened by the recession, will continue to shed jobs for several more months, albeit at a much slower pace than seen since the layoffs began back in 2007.
There’s evidence that’s already happening. Consider the surprising dip in the jobless rate announced Friday. U.S. employers cut just 247,000 jobs, the fewest in a year, and the unemployment rate dipped to 9.4%, its first decline in 15 months. Economists had widely expected the number to jump to 9.6%.
And then factor in Thursday’s relatively positive numbers – the Labor Department reported that new claims for unemployment benefits fell to 550,000 last week from 588,000 in the previous week. Economists had predicted the claims would be around 580,000.
So it seems on the labor front things are getting worse slower, the same dynamic that began to spur optimism in the broader economy earlier this year.
“Employment always lags economic expansion,” said Faucher.
Faucher predicted that as the recovery takes hold the unemployment rate will decline, but it will do so “very slowly” due to the severity of the current recession.
Faucher said he expects the difficult hiring environment to last through most of next year despite increasing signs that the economy is expanding. And despite Friday’s pleasant surprise, most economists still believe the unemployment rate will hit double digits before it turns around in earnest.
In any case, Faucher stressed that the all-encompassing term ‘jobless recovery’ is largely inaccurate. “It’s not really jobless,” he said.
The primary causes for the conflict between hiring and economic growth are twofold. First, much of the growth is being fueled by federal spending -- one-time funding that will dry up at some point. Second, growth has resulted from cuts made by employers who have scaled back on the costs of their operations.
Both of these factors virtually ensure that employers are going to be extremely reluctant to start hiring again until they’re absolutely certain that the economy is back up and humming at pre-recession levels.
Just ask them.
“We’re gonna be sure that we’ve got our feet on solid ground before we do any more hires,” said Diann Alford, owner of Two Sisters’ Kitchen, a restaurant in downtown Jackson, Miss.
For two decades, locals have headed to Two Sisters at lunchtime – many of them from the nearby state capital -- for the kind of fare their grandmothers used to cook on Sundays: homemade fried chicken, country fried steak (so tender you don’t need a knife, according to a recent review) and fried green tomatoes.
But business has fallen off 30% to 40% since the economy soured, according to Alford.
It’s been a struggle to make ends meet, she said, as many regular customers have apparently shifted to brown bags and other less expensive alternatives in an effort to cutback.
Rather than layoff any of her 10 employees, Alford said she spoke to all of the members of her staff and they all agreed to scale back on their hours. So no one has to be let go the employees take turns leaving early.
“The people who’ve been with me have been with me for a long time and we don’t want to let them go. So we’re all making sacrifices,” she said.
Most of her employees have been with her a minimum of four years, she noted, an unusually long time in an industry known for high turnover.
In order to pick up the slack caused by the need for her employees to cut back on hours, she and her daughter are wearing two or three hats, including at times the chef’s hat. A college-aged neice is also contributing a few hours a week when she’s needed.
Alford said she doesn’t expect the employment situation to change any time soon.
“I won’t be hiring more people beyond a shadow of a doubt,” she said. “The ones who are here will have to work harder.”
These same sentiments are being expressed by employers and their staffs across the U.S., and it’s these conditions that will prolong the so-called ‘jobless recovery.’
Alford also gives voice to the sense of optimism that the worst is over.
“My business will pick up and people will be coming in again,” she said. “We’re just gonna suck it up until things turn around.”
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