Pre-Recession Unemployment Rates May Not be Reached for a Decade

As recent calls for additional stimulus and the extension of
unemployment benefits meet with stiff opposition, Congress appears to
have underestimated the profound effect of the current recession on the
labor market. A new report from the Center for Economic and Policy Research (CEPR)
shows that with a job growth path comparable to the last recovery, the
economy will not recover all of the jobs lost in the recession until
March 2014. Assuming the trend rate of growth in the labor force, the
unemployment rate will not fall back to the pre-recession level until
April 2021.

"The economy desperately needs action on
job creation," says John Schmitt, a senior economist at CEPR and a
co-author of the report. "At current and projected job creation rates,
we will still be suffering from the effects of the downturn well into
the next presidential term."

The study, "The Urgent Need for Job Creation," compares various
job growth scenarios with the job loss seen in the recession and
projects when the lost jobs will be regained and when the unemployment
rate will return to pre-recession levels in each case.

Considering more rapid periods of
growth, the analysis shows that using the fastest period of growth of
the 1990s expansion, the economy does not reach the December 2007 level
until September 2012 and does not create enough new jobs to return to
the pre-recession unemployment level until September 2014. If the even
faster growth rates of the mid-1970s and early-1980s are applied, the
economy returns to December 2007 employment levels in November 2011 and
pre-recession unemployment rates by October of 2012.

Current CBO projections indicate that
future job growth will fall somewhere between the rates of the two most
recent expansions. This means that absent serious job creation policies,
the economy will not reach pre-recession levels until well after the
2012 election cycle (June 2013), and not return to an unemployment rate
near the pre-recession level until August of 2015.

The full analysis can be found here.