Even in a Recovery, Some Jobs Won't Return

In the January 12, 2010 Wall Street Journal article "Even in a Recovery, Some Jobs Won't Return," Justin Lahart explains some of the structural changes in the U.S. labor market.

Even when the U.S. labor market finally starts adding more workers than it loses, many of the unemployed will find that the types of jobs they once had simply don't exist anymore.

The downturn that started in December 2007 delivered a body blow to U.S. workers. In two years, the economy shed 7.2 million jobs, pushing the jobless rate from 5% to 10%, according to the Labor Department. The severity of the recession is reshaping the labor market. Some lost jobs will come back. But some are gone forever, going the way of typewriter repairmen and streetcar operators.

Many of the jobs created by the booms in the housing and credit markets, for example, have likely been permanently erased by the subsequent bust.

"The tremendous amount of economic activity associated with housing, I can't see that coming back," says Harvard University economist Lawrence Katz. "That was a very unhealthy part of the economy."

Unhealthy but a boon for men without a college education. One in three jobs, or six million total, have been lost in the manufacturing sector since 1997, the last year the sector posted job gains. The upsurge in construction jobs accompanying the housing boom provided these workers in manufacturing with an opportunity to earn decent wages.

Now that door, too, has shut. With 1.6 million jobs lost over the last two years, the construction sector has accounted for more than a fifth of the jobs lost since the recession began.

For more highly educated workers, finance may no longer offer as many high-paying jobs as it has in the past. Thomas Philippon, an economist at New York University's Stern School of Business, estimates that the financial sector's share of the economy was nearly 20% larger than it should have been. Since the start of the recession, the financial sector has lost 548,000 jobs, or 6.6% of its work force. Mr. Philippon's estimate suggests there will be further pressure on financial jobs.

In other areas of the labor market, the recession accelerated job losses that were probably coming anyway. In November, there were 36% fewer people working in record shops than two years earlier, according to the Labor Department. There were 23% fewer people working at directory and mailing list publishers, and 46% fewer at photofinishing establishments. Those are jobs that, with the advent of mp3 recordings, Google and digital photography, were likely disappearing anyway.

But as the recession hurt already ailing businesses, workers were forced into a sudden adjustment rather than the gradual one they would have otherwise faced. The recession also provided companies with an opportunity to cut jobs no longer as critical as they once were. That may be particularly true of the secretaries and mailroom clerks that advances in information technology have made less necessary. The ranks of people doing office and administrative work have fallen 10.1% since the recession began.

"Those are the production jobs of the information age, and they're being to a substantial extent automated," says Massachusetts Institute of Technology economist David Autor.

The permanent loss of many jobs may keep the labor market from fully recovering for a long time to come.

Prior to the 1990s, jobs rebounded quickly once recessions ended. Payrolls fell by nearly three million in the deep downturn that extended from July 1981 to November 1982. But by the start of 1983, the economy was creating jobs again, and by the end of 1983, the U.S. job count had exceeded its old peak.

That was because more of the job losses were essentially temporary, with manufacturers and the like letting workers go with the implicit expectation that they would be hiring them back once the worst was over.

But since the early 1990s, jobs have been slower to recover from recession. After the 2001 downturn ended, job losses continued for nearly two years. It wasn't until 2005 that the job count returned to its prerecession high.

Productivity-enhancing technology and competition from low-wage countries like China made more job losses permanent. And it took time for new jobs to be created and for workers to acquire the skills needed to do them. In the wake of a far deeper recession, creating new jobs and retraining workers to do them could take even longer.

It is anyone's guess what those jobs will be. The Labor Department has done little more than extrapolate from recent trends. It expects growth in areas like health care, which has been one of the few bright spots. Given the exigencies of an aging population, that seems a fair bet.

One could also make the case that the U.S. is shifting from a consumer nation to a nation of producers, and that will lead to a resurgence in technology and high-tech manufacturing jobs.

But Harvard's Mr. Katz warns that past experience suggests such conjecture is likely fruitless. "One thing we've learned is that when we attempt to forecast jobs 10 or 15 years out, we don't even get the categories right," he says.

Reshaping the Job Market

Hotel Director Forced to Give Up Own Home

Tim Winters, Aspen, Colo. Age 39

After getting laid off in March from his job as operations director at a small hotel, Tim Winters could no longer afford his $1,200 a month apartment. He has been living at family members' homes, an ironic twist for someone who often used to stay for free at hotels when he traveled. "It takes a lot of understanding and time to get used to living with other people again," says Mr. Winters, who started his career in hospitality in 1996. Mr. Winters says he has applied for approximately 170 hotel-management positions and has had 14 interviews, but no job offers yet.

Economy Chips Away at Cabinet Maker's Business

Daryl Jones, Tulsa, Okla. Age 45

Daryl Jones misses the smiles that would appear on clients' faces after receiving the one-of-a-kind cabinets, bedroom sets and other wood furniture he built by hand while running his home-based business. But sales plummeted in recent years, prompting the third-generation craftsman to take a job building cabinets for corporate jets to make ends meet. Still, Mr. Jones is optimistic that one day he will return to his custom woodworking full time. "Once the economy bounces back and people feel comfortable again spending money, then things will start picking back up."

Auto Industry Executive Goes Back to School

Jeff Walker Brighton, Mich. Age 53

Jeff Walker, a former auto industry executive, doesn't mind being among the oldest students at Eastern Michigan University. "I'm happier than just being unemployed and looking for a job," he says. In April, Mr. Walker lost his job as a vice president of operations at a small auto equipment supplier in Brighton, Mich., where he had worked for 22 years. Mr. Walker is studying technology management in pursuit of the college degree he started but never finished after high school. Now, he says, he just wants to "get out of manufacturing."

Veteran Trucker Worries About Paying the Bills

Duane Dittbrenner, Cleburne, Texas Age 50

Duane Dittbrenner was laid off last month from his job at Arrow Trucking Co. He has been struggling to find another trucking job in the Dallas-Fort Worth area. "Where I live, most of it is hazmat and tankers," says Mr. Dittbrenner, who has hauled big rigs for the past 20 years throughout the U.S. Mr. Dittbrenner says he is worried he won't be able to pay next month's bills if a new job doesn't come along. "It's just getting out there and pounding the pavement," he says. "I'll have one soon. All you can do is be optimistic."

Growing Demand, but Low Pay, for Home Health

Debra Allicock, Brooklyn, N.Y. Age 42

Debra Allicock migrated to New York from Guyana in 2000 and took a job as a home-health aide, helping the elderly with errands, meals and light housekeeping. She says the relationships she gains are what motivates her to work 12-hour days despite low pay and no medical insurance. "You get to get very close and attached with them," she says of her clients. Ms. Allicock says her services are in high demand. "Why go to a nursing home when you can stay in your home surrounded by everything you love?" she says. "Maybe one day someone is going to return that favor for me."

Real Estate Executive Tries a New Path

Richard Hawthorne, Laguna Beach, Calif. Age 58

Richard Hawthorne has been out of work since June 2007, when he was laid off from a small commercial real estate investment firm where he was director of development. "In past downturns I've done well, but this downturn has me stumped," he says. Mr. Hawthorne enjoyed his more than 30 years in commercial real estate. "There was something new and totally unpredictable each and every day to solve," he says. But now, tired of being told he is overqualified for jobs in his field, he is launching a business advising financial institutions on how to eliminate investment property debt.

-- Interviews by Sarah E. Needleman