4 Million Lost: Here Are the Workers Consumers Can't Rescue

Economists say that more spending will create jobs, but it could be a decade or more before some key sectors hire back the workers they've cut

600 consumers shopping REUTERS Kevin Lamarque.jpg

In June 2009, the U.S. unemployment rate was 9.5%. In June 2010, it was 9.5%. In June 2011, it was 9.2%. That's it? In two years, the unemployment rate has fallen by just 0.3%? If it falls by that amount each year, we won't see unemployment dip below 6% for over a decade. And that ignores the millions of unemployed Americans not even accounted for in the official statistic for technical reasons. Why is hiring so slow?

At this point, we know that the unemployment problem is unyielding. Although we've heard lots of ideas for ways to try to create jobs, even the best ones would have a modest short-term impact. A few hundred thousand jobs here or there would be great, but they aren't going to get us back to full employment anytime soon. The U.S. needs about 6 million jobs just to get the unemployment rate back to near 6% -- not including the 125,000 or so new jobs needed each month just to maintain the current unemployment rate. In 2011, the economy is averaging just 126,000 new jobs per month.

Even if demand soars, unemployment won't suddenly plummet.

Most economists agree that for unemployment to decline significantly, consumer demand must rise. As sales increase, firms will need to hire additional workers. But even if demand soars, unemployment won't suddenly plummet.

You can see why by looking at the actual job losses from the sectors that have shrunk since the recession began. The chart below breaks down the 6.1 million job losses since September 2008, when the unemployment rate was just 6.2%.

sector job losses pie 2011-06.png

For starters, you can see that nearly half of the job losses, amounting to more than 3 million, came from two industries: construction and manufacturing. Adding in retail, government, and financial activities accounts for another 25%. The job losses are highly concentrated in a couple of select industries.

And here's another way to look at this data:

sector job losses schedule 2011-06.png

The color-coding here matters.

In Pink: Structural, Long-Term Problems

Those in pink are industries where employment won't reach its post-recession levels for probably a decade or more. Too much building occurred during the real estate bubble. Even when construction does pick up again, the sector won't employ nearly as many people as it did during the boom. The government job losses shown are all due to state and local public sector job cuts. With the nation facing austerity over the next decade or more, government budgets will only tighten. Finally, stricter financial regulation will likely result in fewer financial jobs over the next several years or slower growth at best.

In other words, we're not going to see the 2.5 million jobs lost by these sectors return for a very long time, if ever. To find employment, most Americans laid off in these industries need to change careers. This is a structural problem.

In Orange: Pseudo-structural, Medium-term Problems

The news is only a little better for the next two sectors, in orange. The theory goes: as demand returns, more manufacturing and retail jobs should follow. These two sectors together account for another 2 million jobs losses, so their improvement would certainly help. But here's the problem: demand has returned. Inflation-adjusted consumer spending was 3% higher in May 2011 than in September 2008, according to the Bureau of Economic Analysis. Americans are buying even more stuff now than they were when unemployment was 6.2%.

Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well. Bestselling author Mark Bittman teaches James Hamblin the recipe that everyone is Googling.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus


How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well.


Before Tinder, a Tree

Looking for your soulmate? Write a letter to the "Bridegroom's Oak" in Germany.


The Health Benefits of Going Outside

People spend too much time indoors. One solution: ecotherapy.


Where High Tech Meets the 1950s

Why did Green Bank, West Virginia, ban wireless signals? For science.


Yes, Quidditch Is Real

How J.K. Rowling's magical sport spread from Hogwarts to college campuses


Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

More in Business

Just In