Forecast: US will regain 9M jobs by 2014

U. MICHIGAN (US) — Over the next two years, the US economy will regain the rest of the nearly 9 million jobs lost in the Great Recession, economists predict.

During the 2008-09 economic downturn, employment fell by 8.8 million jobs—but the economy has recovered 4.5 million jobs in the last three years. By the end of 2014, another 4.3 million jobs will be added as the economy grows at a moderate pace with steadily falling unemployment, they say.

“The pundits had been reminding us for months that no incumbent president since Franklin Roosevelt had been re-elected with the unemployment rate higher than 7.2 percent and it was 7.9 percent in October,” says Joan Crary, economist at the University of Michigan.

The researchers predict the creation of 2 million jobs in 2013 and another 2.3 million in 2014. See an interactive version here. (Credit: U. Michigan)

“The presidential election is over, the voters have spoken, and yet President Obama will now serve another term. Although the macroeconomy is still underperforming, it apparently was not bad enough to deny the president another four years.”

In their annual forecast of the US economy, Crary and colleagues Daniil Manaenkov and Matthew Hall predict the creation of 2 million jobs in 2013 and another 2.3 million in 2014 as unemployment falls from 7.9 percent to 7.2 percent during that time.

They project overall economic output growth (as measured by real Gross Domestic Product) of 2 percent in 2013 and 2.6 percent in 2014—compared to last year’s 1.8 percent and this year’s 2.1 percent growth.

Housing market bounce back

In addition to moderate growth in GDP and employment over the next two years, the forecast calls for a solid recovery in the housing market. Single-family starts—at an all-time low in 2011—increased by about 100,000 units this year to 540,000. They are expected to rise to 750,000 next year and to more than 1 million in 2014.

Existing single-family home sales are projected to rise from 3.8 million in 2011 to 4.9 million by 2014—an annual increase of about 400,000 over the forecast period.

“The collapse of private residential construction following the bursting of the housing bubble was unprecedented,” Manaenkov says. “After scraping along the bottom during 2009–10, single-family housing starts finally started to rise late in 2011. However, new housing starts are well below the level needed to keep up with new household formation, suggesting that starts will need to keep rising at a rapid pace for some time.”

According to the forecast, both interest rates and inflation will remain at moderate levels over the next two years. Core inflation, currently at 2.1 percent, will inch downward and remain below 2 percent over the next two years.

Mortgage rates to creep up

Conventional mortgage rates will creep upward during the forecast period from a current 3.4 percent to 3.7 percent in 2013 and 4.1 percent the year after—still attractive by historical standards. The 10-year Treasury note will edge up from 1.8 percent this quarter to 2.4 percent by the end of 2014, while the three-month Treasury bill rate will hold steady at 0.1 percent.

Finally, the forecast predicts that light vehicle sales—on pace this year to post the largest annual increase since 1984—will continue to improve from 12.7 million units in 2011 to 14.3 million this year, 15 million next year and 15.6 million in 2014.

Overall, the economists say that despite projected growth and higher employment, many economic headwinds will continue to plague the recovery.

“By now, most are well aware of the fiscal cliff the economy is facing at the end of the year if the lame-duck Congress does not act,” Crary says. “The European debt crisis has ebbed and flowed but remains unresolved. It appears that the belt-tightening actions that have been taken thus far have helped drive the Eurozone back into recession.

“World trade has also been impacted by the deceleration in the Chinese economy. The spate of unusual weather across the nation this year has taken both a human and an economic toll. We will need to continue to navigate these economic—and perhaps natural—hazards in the year ahead.”

The forecast is based on the Michigan Quarterly Econometric Model of the US Economy and compiled by the University of Michigan Research Seminar in Quantitative Economics.

Source: University of Michigan

chat4 Comments

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  1. Jay

    The graph provided is a classic example of what children in elementary school are taught to avoid.

    No label on the Y axis, nor units on the Y axis. What does the blue bar graph represent? GDP? Why does it share the same Y axis as the unemployment figures? There is no set of numbers or units that correspond to the GDP bars. FAIL!

  2. Jobs By Company

    But if you get job in private company it is very difficult for you to get promotion and come up in your life and you will not get good salary.

  3. Nicole

    @Jay thank you for your feedback on the bar graph. Several changes have been made to improve it based on your feedback.

  4. Jeffery Sikes

    With Bernanke leaving his post in Jan of 2014, this stimulus $85b/mo and its effects on the markets will be short lived. One thing is for certain however, a marked re-inflated by $1.02 tn in stimulus per year, is bound for a correction once that stimulus is no longer being provided. Investors know this and are simply figuring how long they can stay in the game and make maximum returns before the inevitable decline occurs.
    Those with retirement accounts (401k’s and the like) will be the ones who will feel the brunt of the losses in 2014 as the market corrects due to the loss of stimulus. In this dicey game of economic control, the worst that could occur is that Bernanke’s replacement would result to raising interest rates at the wrong time and too rapidly, as there is a tipping point towards hyperinflation which cannot be avoided once crossed.
    The third factor which is being currently ignored is the loss of OPEC oil transactions which will come when the Middle East oil business transfers to Iranian/Russian control, which is the game being played out now in the Middle East. Loss of OPEC transactions will seriously devalue the US dollar, exacerbating any interest rates increased by the FED.
    The forth factor to consider is all those people receiving government assistance. Snap increased to the tune of nearly 60 million (SNAP and private food pantries). Compare that to prior administrations, when SNAP was in the 20m or less range. America has a huge anchor dragging on its economy and its name is government expenditures. Everything from cell phones to diapers is being provided by the government to willing participants in multiples of numbers for the same item. People have figured out how to “game” the system and acquire all types of government “freebees and Loot”. The abuse in these government programs is rampant according to continually provided evidence and the expenditures continue to climb in volume and number.
    Finally we have the debt increase for the Federal Government which will come up for discussion again in Q4 2013, just prior to Mr Bernanke’s exit. All in all its going to be a very dicey ride in 2014 and beyond for US investors. Folks should be on their toes in Q4 and watching their investments diligently. Consideration needs to be given to exit plans which will provide the least foreseeable impact, should the assembly of coming events prove to be material.

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