Invictus here, gang.

Is it possible that Dickens was trying to reconcile two seemingly conflicting charts of the labor market when he penned that famous line?

We’re all reminded, month after tedious month, that this is the mother of all jobless recoveries.  One of the charts I (Invictus) have seen used most widely appears every month over at the most excellent Calculated Risk website (first chart in post at link).  I (Invictus) get sick just looking at it.  Bill’s chart is, of course, accurate (sickening though it may be).  Other such charts and graphs have proliferated, and most discuss job losses since the onset of recession in December 2007, or something to that effect.  David Rosenberg has frequently mentioned the hideousness of the job market “xx months since the recession’s start.”  And he, too, is correct.  (Aside:  Can’t wait to see who still refers to me as BR in the comments.)

Here’s how one media report put it:

By almost every measure, the economy has been expanding at a healthy pace for six months. But the nation’s employers remain stubbornly reluctant to add jobs in the United States.  [...]  Another [reason for lack of hiring] is rising productivity, squeezing more work from existing staff and other efficiencies.  [...]  Despite strong economic growth since last summer, the current recovery started out very slowly and that helps to explain the lack of hiring.

That report, from the NY Times, is dated March 6, 2004, fully three years from the onset of the 2001 recession.  And there’s this post’s “the more things change” reference.

If the economy is in recovery — a new cycle –  for the the past 13 (or so) months — “technical” or not — should we perhaps be looking at the employment situation relative to the trough now, and not to the last peak?  To be clear, I am not advocating hard one way or the other (though I will offer some thoughts in closing), simply pointing out that if the recession ended — as many, including the St. Louis Fed (see: Dude, Where’s My Recession Bar, Jan 2010, and St. Louis Fed Tracks Nascent Expansion, Mar 2010) –  perhaps we should now be looking at our experience from the trough?  This is more my offering an item for discussion than taking a stand on the issue — both sides have valid arguments.

Both of the following statements are true, and neither contradicts the other:  We experienced the worst labor market recession since the Great Depression.  From the trough, the labor market is generating jobs at a faster pace than the previous two recessions.

Let’s get to the topic of what date is used as the peg from which to measure.  Here are the relevant charts, but first a few notes:

1) To avoid running into census worker issues, I have chosen to use Private Sector payrolls (USPRIV at the St. Louis Fed).  We’ll keep the government out of this and focus on the private sector.  Makes the comparisons apples-to-apples, as census was not at play in 2001 or 1991.

2) Y-axis scales on the two charts differ slightly and are set to best show changes.

3) BR stole a bit of my thunder by posting Kasriel’s related chart in a recent post, as it drives home a similar point in a totally different context (i.e. Boskin’s a lying sack of shit).  For the record, my post was a work-in-progress at that time and in no way a result of the Kasriel post.

So, first let’s look at a chart indexed to 100 at the beginning of the past three recessions (and below that a chart indexed to their ends, two of which we know, the last we assume) — 2007, 2001 and 1990.  Immediately below is what is generally seen floating around in various iterations and has become the de facto representation of the job market.  Many charts show more recessions, or averages, or maximums and minimum.  I’m focused on 2001 and 1990 because they defined modern-day “jobless recoveries” and are thus the appropriate choices.  (It occurs to me that the phrase “jobless recovery” itself, by definition, arguably demands that we focus on the “recovery” and not the “recession,” or we would name it otherwise.)

True claim:  “This is/was the worst job market since the onset of recession since the Great Depression.”

Now let’s have a look at labor market performance from business cycle bottoms, and I’ll offer the following question:  Is this the more relevant yardstick at this point in time?

True claim:  “The labor market’s recovery since the trough is better than in the last two recessions.”

Here’s another representation, again from the troughs, that clearly drives home the point:

Let’s talk for a moment about the .300 hitter who goes into a woeful 2-15 (.133) slump (actually a bit better than Derek Jeter’s current 8-66, as of Saturday night).  That fact would surely be picked up on by the media.  When he subsequently goes 10 for his next 22 (.455) that, too, would be noteworthy.  His overall 12-37 puts him at his .324 average, but he hardly got there in a straight line.  Now, I’m not suggesting that we’ve just gone 10-22, but I would argue that perhaps we no longer need to talk about the 2-15, and that doing so might be counterproductive.

One last bit of chart porn that highlights the notion that it was the steepness of the drop, and not necessarily the pace of the recovery, that’s the real issue here (this is simply the chart immediately above with peaks added to the mix):

One inference (mine, as promised):  Although we experienced the worst job-loss recession since the Great Depression, this has not been as job-less a recovery as many would have us believe.  It is demonstrably better than the past two recessions as measured from the trough.  Put another way, the labor market was in the deepest ditch it had been in for some 80 years and, given that, is actually doing a fairly reasonable job of climbing out, though the pace simply must accelerate if we are to recover all the jobs we lost in any reasonable time frame (and I can’t stress that final point enough).

If I were going to make a political point, I’d probably be inclined to say that, given the shallow nature of the 2001 recession, the Bush administration’s record in its aftermath was woeful.  But let’s not go there.

Category: Cycles, Data Analysis, Economy, Employment

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

32 Responses to “It Was the Best of Times. It Was the Worst of Times. Yup.”

  1. Lancep1 says:


    This is a very relevant discussion, but I feel there is a lot more to consider.

    1. Both of the last two recessions exhibited some of the financial crisis effects in miniature that we are experiencing now. I don’t consider the job losses after the recession of 2001 a knock on Bush (though I have many) as job losses were small prior to the trough. It was just a different animal as recessions go. Thus it isn’t really comparable to this one. It was so short that after the trough we had most of the losses. That meant a weak “recovery” that didn’t really take off until much later.

    2. The main problem with the comparison to the last two recessions is the depth. We should have expected employment (and just about everything else) to be stronger in terms of growth than typical recessions by a huge margin. Instead, we only look good on employment in comparison to the two recessions which had the smallest declines, and we are not out of the woods yet. If we see a relapse and actually see negative growth the comparison will be as weak or weaker, though I expect employment will carry less of the adjustment this time as companies are running pretty lean (which means margin declines for stocks.)

    3. Interestingly Hussman digs into this question using an impulse response model which makes the same conclusion.

    This isn’t “better” because the last two recessions saw much fewer job losses relative to the decline in output, the declines in general were so much smaller you would hardly expect such shallow declines to need a vigorous recovery (and the general path of the 2001 recession makes comparisons difficult as well.)

  2. dead hobo says:

    Invictus said:

    If the economy is in recovery — a new cycle – for the the past 13 (or so) months — “technical” or not — should we perhaps be looking at the employment situation relative to the trough now, and not to the last peak?

    1st, let me tell you I had a hard time following your article. I THINK you said the rate of recovery is very important, the rate of recovery is higher in this recession than in the past ones, and the current level of employment relative to the past high is less important than we make of it. (Good writing is more than getting the facts out using proper sentence structure and correct paragraph construction. Please use me as an example. While you probably disagree with much of what I say, you have to admit I usually get a lot of very complicated ideas out, interplay them off each other coherently, and you generally have no problem understanding my messages or the complicated theory supporting them. Sometimes I can even make a hysterical joke about droll and otherwise incomprehensible monetary theory that is easy to understand on all points. Try being more conversational. Try this exercise … instead of drawing Tippy, describe him in a way nobody else ever has but make it interesting.)

    Please identify the job loss recovery you mention. Where was it? Erin Burnett’s imagination? Except for last week’s new claims understatement due to estimates vs actual counts, the macro counts have remained dismal. Continuing claim rose last week, I believe. +67k jobs is nice, but these occasional bits up aren’t much. Especially when the facts behind the numbers show that service replaces mfg most of the time and low quality jobs appear to be replacing high quality jobs over time (just my impression). Please explain why getting back to break even is less important that a fast pace of growth that is hard to see.

  3. Invictus says:

    @dead hobo

    I apologize for perhaps writing a post that was not as coherent as I would have liked. It was a hard one to write, believe me, and I struggled with how best to get my point across. In the end, I probably did not do as good a job as I would have liked, despite having worked on it on and off for the past few days.

    Please identify the job loss recovery you mention. Where was it?

    It’s right in the middle of the third chart, or: Which one of those three lines isn’t like the other two?

  4. dead hobo says:

    1 more thing … what’s the deal with the birth death adjustment? Is it still a phony number that the geek squad thinks may resemble uncounted new jobs but nobody will know for sure for two years? I recall the B.D number was lambasted here on a regular and frequent basis and then, for reasons never explained, it never gets mentioned anymore. Real or phony? Most of the time the b/d adjustment dramatically changes the bottom line if you subtract it out. How does the b/d adj fit into the impressive increase and does the b/d adj represent real or fantasy jobs?

  5. dead hobo says:

    Yes, most of your stuff is easy to read. Sorry.

  6. louiswi says:

    Regarding the unemployment rate, how about some discussion on what I see as the unemployed/unemployable rate. Example, yesterday at a rally I saw a guy with a hog ring in one ear, another with a stove bolt in another ear, a guy with a partially shaved head that had a tattoo of a frog going poo poo, and a gal with multi-colored hair with various piercings in her face. I submit these folks (unless they are rock stars), are not only unemployed but unemployable. That group also includes the group who have decided to have nothing but contempt for education and instead have opted to be “fashionably stupid”. I suggest there is a significant number of folks who are not just unemployed but in fact un-employable.

  7. dead hobo says:

    Last post from me on this: I still don’t get your point. Either everyone else is wrong about the scope of the current employment problem, or this data is cherry picked in a way to find something good to say about a big problem. It just doesn’t make any sense in a lot of ways.

  8. b_thunder says:

    1. the bigger the fall, the bigger is the snapback.
    2. is the percentage of jobs gained since the trough vs lost since the peak greater than in the past 2 recessions? (i.e. are we getting back a larger share of the lost jobs than in previous recession?)
    3. does the snapback jobs rally have “legs”?
    4. even if the recovery is not as “jobless” as generally perceived, does it still support 1100 S&P?

  9. constantnormal says:

    I also, would like to know whether the charts presented incorporate in any way/shape/form the rising pool of potential workers, courtesy of population growth, and whether there is anything, anywhere that tries to quantify the degree to which would-be retirees are clinging to their jobs as if to life jackets on a sinking Titanic, and if that data is factored into employment/unemployment numbers.

    I understand that the Fed’s birth/death adjustment does a horrid job of this, but I am unaware of any other that even attempts it. Is ignoring the data better than misrepresenting it?

  10. masdf says:

    louiswi – I’m not into anecdotal evidence, but I’ll take the bait. Judging from my local Starbucks and Safeway, they are all eminently employable.

  11. AHodge says:

    but the key is not whether this jobs rally is a little better than the last two jobless early recoveries. It is.

    the key is whether finance is so broken we cant limp upward.
    in the face of
    1) easily spookable consumer and business- they have been through a lot. That hiring deceleration since the April market jolts is big.
    2) a 2.5% pts of GDP fiscal contraction next year, if congress does not get off gridlock.

  12. pflantzdog27 says:

    There was a larger stimulus package in 2007 than either of the previous two recessions. The Obama administration has estimated that this package has created 3 million jobs. This makes this comparision that of apples and oranges.

    It sounds like your encouraging us to take comfort in the strength of the employment recovery. Is that how you really feel?

  13. franklin411 says:

    Unionization rates have been plunging since 1980, and are now at historic lows.

    The degree of employment recovery in economic crises has been plunging since 1980, and is now at a multi-generational high.

    Is there a correlation between the fact that, by all accounts, employers are wearing out their whips on the backs of the survivors, and the fact that workers have reached a degree of powerlessness in the workplace not seen since the 1890s?

  14. tawm says:

    What is the incentive for an employer to hire more people in the US? Look at the COST layers beyond salary: adversarial nature of labor-management; poor education; high entitlement; poor health; litigation risk; HR challenges (sex / race / religion); not to mention regulatory compliance. Seems small wonder employers are just NOT hiring Americans. Until government does a lot more to embrace employers and make employment worthwhile, it’s just NOT worth the cost.

  15. ACS says:

    It’s a waste of time to compare apples to oranges. The prior two recessions were followed by bubbles in tech and then housing. They were also cyclical ones. This one seems to be secular and is being followed by deleveraging rather than a new bubble.

  16. Ken B says:


    FWIW, I ventured into a tatoo shop for the first time in my life to watch a friend at a design consultation. The characters you describe were the norm in that place. I, with the clean cut look and no tatoos, was the outcast. So maybe there’s some hope for them … (not that I’m optimistic about it)

  17. Freestate says:

    Invictus, the reason your analysis was difficult is that you have introduced into the analysis the relationship between when GDP troughs and when employment troughs. We know that employment will always lag GDP. In this recession the two troughs happened to be fairly far apart. And in the 2001 recession private employment did not trough until well after the official recession ended. It troughed in July of 2003. So the differences between the employment cycle and the GDP cycle are causing difficulties in answering the fundamental question: Is employment recovering more quickly or more slowly than in prior EMPLOYMENT downturns.

    The issue is much simpler than you present if you just stick with looking at the employment cycles. Let’s make the question simple: Is employment recovering from it’s trough at a faster or slower rate than prior employment downturns? We are now ten months from the employment tough, so here is the data for each of your three recessions 10 months after the employment trough:

    Today: +.7%
    2003: +1.4% (in May 2004)
    1990: +1.1% (in Dec. 1992)

    So, yes, 10 months after the trough we have recovered at half the rate of 2003 and about 2/3 the rate of 1990. There are, of course, a couple of other interesting points. First, you can look at the amount of time it took to hit the trough and compare it to the recovery time to prior peak, and, second, you can then take into consideration the steepness of this period’s decline. Here are the prior two recessions in terms of decline and recovery time:

    1990: 23 months of decline followed by 15 months of recovery to peak
    2003: 30 month of decline followed by 23 months of recovery to peak
    Today: 22 months of decline

    You can see that in the prior employment troughs recovery took about 70% of the amount of time compared to the decline. The 70% recovery time rate is important because it shows why a steeper decline has a faster recovery. For this employment cycle to hit a 70% recovery rate would mean that we should be fully recovered in five to six months from now.

    Employment today would need to be 4.9% higher than the trough if we were going to recover at the same relative rate as the prior recessions. So these are the key points: 1) this employment decline was shorter than the prior declines, 2) this employment decline was much deeper than the prior declines, 3) the employment recovery is far short of what we would expect given these prior two facts.

    There is just little doubt that this employment recovery is FAR weaker than any other post WWII recession. We lost a lot of jobs fairly quickly and they are coming back at a glacially slow pace.

  18. Lancep1 says:


    Thanks for doing a much better job of explaining what I was trying to say.

  19. JusTryinTaMakeIt says:

    The real factors that are going to determine how good the coming decade is for employment are 1) how strong the labor market will be when the economy grows and 2)whether there will be one or more recessions and how deep will they be. The past few months moderate jobs growth at a rate of about 60,000 per month or 700,000 per year really doesn’t tell us much about how those key factors will unfold. To restore unemployment to the 2000 level we will need to average 190,000 additional jobs per month (2.3 million per year) for 10 years. From 1960 to 2000 we averaged 1.9 million additional jobs per decade. Of course in the past decade there was NO net increase in jobs, and unemployment grew by 15 million!

  20. baychev says:

    c’mon, put some positive spin on it, don’t call it jobless recovery, call it statistical or debtful recovery :)

  21. JusTryinTaMakeIt says:

    I have posted a spreadsheet on Google Docs that contains unemployment and GDP from 1960 to 2009, which the public can now access. It was used to develop the comments I posted above.

  22. advocatusdiaboli says:

    “From the trough, the labor market is generating jobs at a faster pace than the previous two recessions.”

    Yes, but what is missing in your discussion is the same thing that is nearly always missing in the media discussion of recovery–a discussion of the “quality” of those jobs. A recovery that is not producing jobs of a quality (wages, benefits) comparable to those lost, is unsustainable for a country who relies on it’s workers consumption to make up over two-thirds of GDP.

  23. Kort says:

    The comment in the final paragraph about the Bush admin adds no value. To close with “but let’s not go there” is, well, “to go there”. If you don’t want go to there, then don’t. Smart people will make up their own minds and stupid people will think an (R) or a (D) next to somebody’s name makes them good guys or bad guys. Otherwise, the Huffington Postalization of the commentary here will continue, and if going Left will make me money or makeswiser investment choices–then great, just come out and say it. Otherwise, let’s leave Bush back where he belongs…history.

  24. kpny says:

    This is arguably the THIRD Bush jobless recovery. I graduated from college into the first Bush jobless recovery in 1991.

  25. Hume says:

    Invictus, you are misleading people. You have linked to this chart from Calculated Risk:
    However, in your analysis you have included only two recessions/recoveries for comparison. Of course, you have included two recessions with most sluggish recoveries. Comparison looks completely different when other post WWII recessions are included.

  26. Darmah says:

    I like this. It’s a good alternative way of looking at the situation. What it tells me is:

    * It seems to confirm that jobs are a lagging indicator.
    * It highlights the devastating job losses during the recession.
    * Could be used as input for a discussion on the disconnect between the global economy represented by multi-national corporations and the national economy.
    * Tells me “jobless recovery” is a valid term — if 2/3 of the economy is consumer driven, “we” haven’t recovered.

    I’m not certain but I think if you take the 2001 recession’s “100″ point out to the start of the 2007 recession, it won’t go much above 100. That plus we needed something like 125,000 added to the economy per month for all of the 2000′s just to keep up with pop growth, makes for a depressing situation now, which will probably take years to recover from.

  27. willid3 says:

    I am wondering if one of the reasons for the really slow job creation is that US corporations will hire elsewhere first. long before here. which will make any recovery very slow. if it happens at all

  28. Andy T says:


    Um, WTF point are you trying to make here?

    If you just knocked someone to the ground, how much would they bounce after hitting the floor? If you threw someone from a 30 story building how far might they bounce?

    Perhaps “you’re on to something” here, but it seems like a silly discussion point right now. Intuitively, the harder something collapses (or falls), the more robust the initial rebound should be–the fact that we haven’t bounced harder, in terms of jobs, is actually surprising and disappointing.

    You’re doing a good job, though, it being circumspect in the beginning of the passage with a statement like this: “To be clear, I am not advocating hard one way or the other”. That level of equivocation will make you an all-star Business Blogger someday.

  29. Herbwb says:

    Comparing one recession’s job loss depth, trajectory, and recovery to another seems useless to me unless BOTH the “causes” and the “responses” are similiar in magnitude and financial environment. The latter being the “root” of both the recession AND the recovery. In my opinion what we have experienced is NOT a typical recession in either category.. and it is global in scope. There is no historical comparison (thankfully.. though the “great depression” comes too close for comfort here at home!). I, for one, will be greatful for a slow but steady increase in job creation as business continues to improve and some confidence returns regarding the “sanity” of our financial institutions. I do not expect this will be a fast event, given the deserved loss of confidence by most people around the world.

  30. tradeking13 says:

    Yeah, 1934 was a great year for job creation, too, as the unemployment rate went from 25% to 20%.

  31. [...] a little while back I highlighted the fact that Private Payrolls (USPRIV at FRED) — indexed to 100 at economic [...]