Job Market on the Mend, but Wait for 2011

"One of the factors that will keep unemployment high, even as companies begin to increase hiring, is the re-entrance of many people who have been sitting on the sidelines, waiting until a stronger job market emerges. Once these individuals enter the fray, they will again be counted among the unemployed," said John Challenger, CEO of Challenger, Gray & Christmas.

Since December 2007, when the recession was merely a crisis in the subprime mortgage market, close to 2.5 million positions have been cut, with the heaviest losses coming between July 2008 and June 2009 -- more than 1.6 million jobs were slashed. Job market disaster was on the horizon even before the turmoil at Lehman Brothers and American International Group (AIG), suggesting that the events of September 2008 really just exacerbated an already dismal situation.

The cuts peaked in January 2009, Challenger says, hitting 241,729, the worst for a single month since January 2002. Since then, layoffs have fallen steadily, but for the six months of 2009, the monthly average stayed over 130,000. In the second half of the year, the monthly average sunk to 69,000, with the 50,349 posted in November the lowest since December 2007.

"The end of the year is typically when we see a surge in layoff activity. The fact that job cuts continued to decline in the fourth quarter is a good sign that the job market has truly started the recovery process. Unfortunately, the recovery process is slow, so it could be several months or even years before unemployment returns to pre-recession levels," said Challenger.

From November 2007 to November 2009, the number of unemployed people in the United States more than doubled from 7.2 million to 15.4 million. Another 6 million last month weren't considered part of the labor force, since they hadn't looked for a gig in at least four weeks (up from 4.2 million in November 2007).

"Even if we begin to see net payroll gains in the 200,000 to 300,000 range by the end of 2010, it probably will not be enough to offset the influx of job seekers re-entering the labor pool after months of self-imposed exile," Challenger noted. But, job gains of greater than 200,000 a month aren't likely to appear until 2011, meaning that the "2010 job-market recovery will be felt first by the millions working in temporary help positions and those working part-time for economic reasons." Employer confidence in future business conditions will help to make the job growth trend permanent.