A Robust Rebound to Mediocrity: July 2010

As noted earlier, we believe that 3 million to 3.5 million jobs a year will be formed in each of the next three years. In fact, this is roughly the rate at which jobs have been added since March 2010. However, this rate of job creation must be viewed in the context of the nearly 8.4 million jobs lost during the recently concluded recession, and the 1.8 million jobs normally added annually to the U.S. economy.

We believe that just as the standard economic models failed to predict outsized job losses, they are similarly incapable of predicting an outsized recovery. This pattern characterized the super recessions of 1973-1975 and 1980-1982. In both cases, the extent of the recession was seriously under-predicted by economic models, as was the robustness of the recovery. This is because these models are based on centrality and momentum, making it almost impossible to predict extreme ups and downs, even though notable ups tend to be followed by notable downs (and vice versa).

We project that for the next three years, we can add 3.3 million jobs each year, consisting of the normal 1.8 million new jobs associated with the additional 3million people entering the economy, plus 1.5 million of the 8.4 million lost jobs being recovered. Stated differently, if we recreate 1.5 million of the lost 8.4million jobs each year, in addition to population-driven job growth, for the next three years, we will have restored only 4.5 million of the 8.4 million lost jobs. Thesis hardly a rapid return of the lost jobs, as 45% will not have been made up after three years.

Click to view the NAI White Paper – A Robust Rebound to Mediocrity July 2010 in PDF format