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Labor Market Transition to Recovery Challenging to Navigate, Report Finds

March 3, 2010 — The road from recession to recovery is tough and complex, as illustrated in January when reports showed employment and unemployment both going up.

According to a report from The Conference Board, real GDP, consumer spending, and productivity increased in the U.S. in late 2009, and the speed of job losses declined from 2008 and the first half of 2009. But there have not been consistent monthly gains in net hiring. In January 2010, the U.S. labor market shed jobs, yet the unemployment rate fell.

“We’ll experience more months of these mixed signals before the labor market reaches sustained recovery,” said Christopher Woock, researcher, human capital, The Conference Board and co-author of the report, Labor Market Transitions: from Recession to Recovery. “In the months to come, like in past recoveries, we expect ‘discouraged workers’ to be a factor contributing to the labor market’s complexity.”

The number of “discouraged workers” continues to rise (it’s now over 1 million), according to The Conference Board. These are workers who want a job, but have stopped actively looking for one. It will take strong signals from the labor market to bring these individuals back into the labor force, and their re-entry will increase the number of people the labor market needs to support.

The percentage of unemployed who have been out of work 27 weeks or more continues to rise (now more than 40%), The Conference Board reports. If significant structural change in the economy results from this recession, many of these long-term unemployed may find their skills aren’t needed in the recovery work force. This could result in a period where the unemployment rate remains relatively high until these individuals re-tool or find alternative employment matches for their skill sets.

The Conference Board report suggests that the continued rise in temporary employment signals that businesses are not convinced the recovery is underway. Temporary help provides the flexibility employers seek in uncertain times, letting them be more responsive to changes in market demand.

“The labor market complexity reflects people in transition,” Woock said. “The high number of long-term unemployed and individuals working part-time for economic reasons, coupled with the likelihood that many employers remain uncertain that the economy is firmly on a recovery path, suggests we could be in for a long, slow labor market recovery.”

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