The Pain to Come

It's probably the last thing anyone wants to hear so soon after news of the 533,000 lost jobs suffered last month -- but if history is a guide, it's only going to get worse from here.

That's because the majority of job losses in the 11 previous downturns came in the second half of the recession. We're 11 full months into the current one and most forecasters (what else do we have to go by?) think the recession will last through the end of next year.

Let's assume that's somewhere near the truth. Out of all the jobs that were lost during the average recession since 1945, 26 percent of them came in the first half and 74 percent in the second half. There've been 1.9 million jobs lost thus far in the current downturn, so the historical average would mean we could lose another 5.7 million jobs, for a total of 7.6 million by the end. That would be the most jobs lost during a post-Great Depression recession. (If you factor in population, the short 1945 recession, which saw the evaporation of 3.3 million jobs, was worse.)

But there's at least one reason to have some optimism. Job losses in the three most recent recessions, including the 16-month 1981-82 downturn, were more evenly spread out with an average of 42 percent of all lost jobs gone in the first half and 58 percent in the second half.

What happened to cause the more balanced jobs picture?

One likely explanation is the Great Moderation, and now we just have to hope that the GM is not over with the collapse of the securitization market.