The Wall Street Journal this morning emphasizes a point that serious economists have been warning about for more than two years: many of the jobs lost in the recession are gone permanently. That’s because the industries that have lost the most jobs are still unsustainably large, and will almost certainly have to shrink further over the next five years. The trend is obvious enough about construction and finance, which in two years have declined only 20 percent and 6 percent, respectively, but is more decisive in smaller niches:
In other areas of the labor market, the recession accelerated job losses that were probably coming anyway. In November, there were 36% fewer people working in record shops than two years earlier, according to the Labor Department. There were 23% fewer people working at directory and mailing list publishers, and 46% fewer at photofinishing establishments. Those are jobs that, with the advent of mp3 recordings, Google and digital photography, were likely disappearing anyway.
The Wall Street Journal does not mention this, but there are plenty of other overheated industries that are likely to decline in the coming years, even if they have mostly avoided this so far: health care, education, and defense, to name three of the largest. (The Wall Street Journal cites a projection for a further increase in health care from the Department of Labor, but then cautions that these extrapolations tend to look wacky in retrospect.)
Permanent job losses occur every year, but with five years’ worth hitting during what was effectively a national hiring freeze, it will take years for the economy to recover. This is what prevents a bounce-back recovery. The economy can bounce back when employers fill job positions that they have temporarily left vacant. Creating new jobs is a slower process, and at this point, may not be able to keep up with the additional job cuts that are already planned.