The Jobs Gap

Updated September 6th, 2013

An interesting "gizmo" (for lack of a better word) by the Hamilton Project at the Brookings Institute gives us an idea of just how big the "jobs gap" is in the United States, despite the modest improvement in the employment picture.

The "jobs gap" is defined as the number of jobs that the United States' economy needs to create in order to return to its pre-recession employment levels AND absorb all of the new people that are entering the labor force every month.

Here's what the "gizmo" looks like:

Basically, you plug in the number of jobs that you think the economy can create on a monthly basis (in hundreds of thousands) and chart will provide you with the number of months until the "jobs gap" is reduced to zero.

Here are a couple of examples:

If the economy adds 208,000 jobs per month (the average rate of job creation in the 2000s shown using the purple line), it will take until April 2020 to reduce the "jobs gap" to zero.

If the economy adds 321,000 jobs per month (the average rate of job creation in the 1990s shown using a dark blue line), it will take until November 2016 to reduce the "jobs gap" to zero.

From the Bureau of Labor Statistics, here is a chart showing the number of jobs created on a monthly basis back to 2003 and the annual averages:

First, notice how the number of jobs lost on a monthly basis during the Great Recession averaged 301,000 in 2008 and 421,000 in 2009, peaking at a monthly loss of 830,000 jobs in March 2009.  Basically, the job losses were at a far greater rate than they have been replaced, thus part of the "jobs gap" problem.

You can easily see that job creation since the end of the Great Recession has been poor at best.  In 2011, an average of 175,000 jobs were created on a monthly basis; at that rate, it would take another 9 years and 9 months to close the "jobs gap", taking us out to November 2022.  In 2012, an average of 183,000 jobs were created on a monthly basis; at that rate, it would take another 8 years and 11 months to close the "jobs gap", taking us out to February 2022.  Thus far in 2013, an average of 180,000 jobs were created on a monthly basis; at that rate, it would take another 8 years and 9 months to close the "jobs gap", taking us out to April 2022 before the economy returns to its pre-recession job health level.

Now, keeping in mind that the highest number of jobs created on a monthly basis in the last decade was 521,000 in May 2010 (which was followed by four months of contraction!), it would still take the U.S. economy another two years to close the "jobs gap", taking us out to February 2015 before the economy gets back to where it started from.

Looking at the time frames in these examples, one should also keep in mind that there will be recessions over the next 10 years, making the employment situation even worse since it appears that it is extremely unlikely that the "jobs gap" that occurred after the Great Recession will be closed.

When you read the next ADP or BLS job report, please keep the "jobs gap" in mind.  It will help all of us keep the flood of employment statistics in perspective.