... In fact, on our current trajectory, the U.S. will catch up to 2007 levels of economic output sometime in the next couple of months. Yet at the current job creation rate of a little north of 100,000 jobs per month, the U.S. economy will not recover its 2008-2009 job losses until the middle of the decade. And because so many distressed workers have quit the labor force altogether, the pace of job creation would have to double for the U.S. to see total employment rates return to pre-crisis levels before 2015.
What's the problem? Consider just these factors:
1. This past recession delivered its hardest blow to some especially labor-intensive industries: construction and retailing. Even as economic activity recovers, we're not going to see lots of new home building. Nor will we see people using their cash-out refinancings to go shopping at Best Buy. Americans are saving again. Those who have jobs are paying down debt.
2. Recessions lead to consolidations. Weak firms go broke, strong firms gain market share. The strong firms hire, the weak firms fire. But because the strong firms are more productive (that's why they are strong!), they do not hire nearly as many people as the weak firms have laid off.
3. A catastrophic experience like the 2008-2009 recession changes an employer's expectations about the future. Caution and self-protection become the guiding rules of business management. Companies decide it's safer to have one worker too few than one too many. They may not recover their exuberance and optimism for years.
4. Last and most important: The economy, although growing, is not growing very fast. The rule of thumb is to reduce unemployment by 1 point, the economy must grow 2 points over trend. Right now, the U.S. economy is still growing below trend. The engine is just not revving fast enough to move the car.
Then there's public policy. Employers must fear that the future probably holds heavier taxes, more regulation and higher employee health care costs. The outlook might be worse under a President Obama than a President Romney, but it looks sufficiently ugly either way.
As I said: That's the optimistic scenario, the 1936 scenario.
Don't get me started on the other.