The U.S. Economy is apparently not as resilient as it once was, at least in terms of generating post-recession job growth, the Conference Board reported Thursday. The continuing housing slump is a major reason why.
The board said the current recovery is the second slowest on record since1961 but noted that the last three recoveries, all since 1991, neither job growth nor Gross Domestic Product "roared back" as they had in prior years.
Not surprisingly, the board said continued job contraction in the construction sector was a major factor in retarding growth, having fallen 8.1% since the recession ended 21 months ago. Also not surprisingly, jobs in finance have fallen 1.8% over that same period. The third major drag has been state and local government employment, which has fallen 2.6% despite the boost provided by $785 billion in federal stimulus spending, much of it directed at maintaining jobs at the state and municipal level. An increase of 38,000 federal jobs during the recovery was insufficient to offset the loss of 429,000 state/local jobs.
Since the end of recession, total employment in construction, finance and state/local government declined by 1.06 million jobs, while the rest of the economy added only 1.3 million jobs.
"Employment in construction, finance and state/local government is not only declining, but declining much faster than in any other recovery since 1960,"said Gad Levanon, associate director of macroeconomic research at The Conference Board. "The decline in these industries is a result of forces that go beyond the ups and downs we see in typical recessions, and a strong bounce back is unlikely in the near future."
The board projects that the housing downturn, high oil and commodity prices, government austerity measures and limited consumer spending will hold GDP growth to 2.5% this year and next as unemployment remains above 8% through 2012. A normal expansion rate during recovery is between 3.5% and 4%.
"Longer-term prospects are more promising, however," said Levanon. "In the last six months, employment outside of construction, finance and state and local government has already been growing faster than nearly any other six-month period in the last decade. Once constraints in these hard-hit sectors loosen, overall job recovery is likely to pick up pace."