The following chart I have found useful in analyzing the baseline for this entire recession and seeing past lots of what I would consider noise about the causes and consequences.

Here I basically split the labor market into two parts: Goods and Government and everything else.
Everything else hit a wall in 2008 but as you can see it was a nice natural V. It was not even the job-less U of 2000. And since the beginning of 2010 everything else has been growing just as fast as the last recovery. As we moved into 2012 job growth seems to be speeding up faster than anything we saw last time around.
The difference this time was goods and government. To cut it down to the micro-level I like we are largely talking about construction workers, metal and automotive workers, and school teachers.
These workers are massively influenced by credit constraints. One cannot build a building without credit. One cannot buy a vehicle without credit and state and local governments have very little credit room by statute.
So what we need for job growth to really hit its stride is for construction to comeback, cars to comeback and school teachers to come back.
The process is well on its way with cars, though could be derailed. Construction is building and my best guess is that school teachers will start to be rehired in about 12 – 18 months.
Though again because these sectors respond so much to liquidity the job recovery is still fragile.

12 comments
Comments feed for this article
Sunday ~ March 11th, 2012 at 3:25 pm
The “Medical Examiner” gets the “Anatomy” Wrong | Historinhas
[...] his “Anatomy of Recession and Recovery”, Karl Smith “severs” the labor market “anatomy” in two: Here I basically split the labor [...]
Sunday ~ March 11th, 2012 at 4:02 pm
Marcus Nunes
Karl, I think you are too “optmistic”. The “body” suffred much more this time around.
http://thefaintofheart.wordpress.com/2012/03/11/the-medical-examiner-gets-the-anatomy-wrong/
Sunday ~ March 11th, 2012 at 9:43 pm
John A
I think one major reason for such a big dropoff in government was the collapse of housing prices and, hence, drops in assessed values of property and, hence, reduced property tax collections. This has a huge effect on local and state governments. I’m not sure, but I don’t think there’s been such a big dropoff in property values since the Depression.
Sunday ~ March 11th, 2012 at 9:49 pm
Kaleberg
I don’t see how an upward spiral would work. Part of any successful signal would be rising wages as rising government and consumer demand create a demand for labor. Unfortunately, the Fed is primed to jam on the brakes at the first sign of rising wages. Barring a major change in our politics, the US has peaked. In fact, we peaked 30 years ago, shortly before our “morning in America.”
Sunday ~ March 11th, 2012 at 10:02 pm
Marcus Nunes
The only thing that “peaked” 30 years ago was inflation!
Monday ~ March 12th, 2012 at 10:05 am
On Types of Jobs « Blog of Rivals
[...] Smith writes here, here, and here about the types of jobs that have grown since the late sixties. Specifically he [...]
Monday ~ March 12th, 2012 at 6:16 pm
robertwaldmann
If you want to look at credit sensitive sectors you really should not add government workers to the goods producing workers. As you note, government employment is extremely insensitive to credit conditions, because state a local government access to credit is legally restricted.
Employment in goods production is recovering. The decline was (of course) much more severe than in the last two recessions, but the recovery has started much sooner after the trough.
https://research.stlouisfed.org/fred2/graph/?graph_id=68673&category_id=0
Earlier inflation fighting recessions have a very different pattern exactly because those downturns depended on credit conditions which were very tight during the recessions deliberately created by the Fed. and then suddenly looser.
You note that construction is very different from manufacturing. So I looked at manufacturing employment. This time it is very different from the last recession, since it declined less and is recovering.
http://research.stlouisfed.org/fred2/graph/?graph_id=68675&category_id=0
How about durable goods (which would depend on credit conditions more than non durable goods). Compared to last recession same absolute decline (greater proportional decline). This time recovery. Last time continued decline
http://research.stlouisfed.org/fred2/graph/?graph_id=68676&category_id=0
It’s construction this time.
For this graph I am going to start in 1970, because I notice something. The delay from the peak of construction employment to rapid growth of construction employment has been similar in the four peaks before the latest and should be coming to an end for the latest case around now (and employment has begun to increase).
http://research.stlouisfed.org/fred2/graph/?graph_id=68678&category_id=0
I didn’t know this. I know the economy boomed back after the second dip of the double dip Volcker recession, but I didn’t think that this was after a long period of low construction employment. Also I remember the 1974-5 recession lasting a long time, but hey I was only 1 when it ended and not looking at disaggregated data back then. I knew about Bush mush recoveries, but I was very inclined to consider them extraordinary. It all fits an industry which takes a while to get going either because of excess stock because of overbuilding or because uh Rome wasn’t built in a day (and Romulus spent a century just getting planning permission and hiring an architect)..
Wednesday ~ March 14th, 2012 at 3:22 am
Sectoral Shifts and Income Inequality | FavStocks
[...] Anatomy of a Recession and a Recovery « Modeled Behavior: The following chart I have found useful in analyzing the baseline for this entire recession and seeing past lots of what I would consider noise about the causes and consequences. Here I basically split the labor market into two parts: Goods and Government and everything else. [...]
Wednesday ~ March 14th, 2012 at 6:20 am
The Bifurcated Jobs Recovery – - BizNewsX - Business News AggregatorBizNewsX – Business News Aggregator
[...] Smith at Modeled Behavior yesterday wrote a couple of excellent posts wherein he divided the US workforce into two parts: (1) “goods and government” vs. (2) [...]
Wednesday ~ March 14th, 2012 at 8:31 am
The Bifurcated Jobs Recovery « Tax Australia
[...] March 14, 2012 at 12:11 pm Source By Business InsiderKarl Smith at Modeled Behavior yesterday wrote a couple of excellent posts wherein he divided the US workforce into two parts: (1) "goods and government" vs. (2) private [...]
Thursday ~ March 15th, 2012 at 10:49 pm
Goods and the Government and Everything Else
[...] Smith is onto something in his recent posts analyzing the evolution of employment in our economy, first in the recession and recovery, then going back earlier and charting that development since 1939, and finally with a [...]
Thursday ~ December 6th, 2012 at 1:54 pm
post your jobs here !
I really like reading an article that can make men and women think. Also, thanks for allowing me to comment!