Some lost jobs may never return

/ Source: CNBC

Jobs remain high on the Bush administration’s agenda. Earlier this month, the president announced he is creating a new post of Assistant Secretary of Commerce for Manufacturing to work on bringing jobs back to the hard-hit sector — a move that may be easier said than done.

Since President Bush took office, three million jobs have been lost in the United States, 2.5 million of those in the manufacturing sector. Now, a newly-released study from the Federal Reserve Bank of New York talks about the structural nature of many of those job losses.

The latest turn in the business cycle has been an economic paradox. Though the recession technically ended in November, 2001, payroll numbers continued to fall. Now, economists at the New York Fed say there is something different about this latest recession and recovery: Many of those jobs are not coming back.

“Unlike previous recessions, almost all of the increase in unemployment has been due to permanent layoffs — not temporary layoffs,” said Erica Groshen, and economist with the New York Fed.

Traditionally, a factory or business will lay off workers in slow periods and rehire them when demand picks back up. But in economic jargon, many of the job losses this time around seem to be structural, not cyclical.

According to the New York Fed’s study, entire industries continued to lose jobs during the first 17 months of the recovery. Among them: Airlines, communications, electronics manufacturers, industrial machinery manufacturers and makers of transportation equipment. While health services and mortgage brokers saw job gains, that’s little consolation if you lost a job in one of the contracting industries.

“The net change is toward different places, different industries, different occupations, maybe even different regions from the jobs they are replacing,” said Groshen.

Companies have been moving away from the concept of permanent employees and toward temporary work teams that are pulled together for projects, according to economist Charles Heckscher of Rutgers University. And the trend, he said, has been going on for years.

“In the 90’s, you had a lot of non-standard work arrangements,” he said. “But because the economy was strong, people didn’t suffer.”

But this time around things may be different. One factor may be the over-investment bubble of the 90’s which has not yet been worked out of the economy. Another is that creating new jobs is harder than just giving people their old jobs back.

“New jobs are riskier to create and take longer to create,” said Groshen.

The New York Fed economists conclude this is a new kind of recovery, driven not by job gains, but by productivity increases. That productivity is great for employers, but may be costing some workers their jobs.

There’s one positive for those workers lucky enough to still have a job. The study’s authors point out real wages have grown during this recession and recovery because of strong productivity growth. And that’s a much better performance than in prior recessions.