Report: Many Lost Jobs Gone Forever

About a quarter of the 8.4 million jobs eliminated since the recession began won't be coming back and will ultimately need to be replaced by other types of work in growing industries, according to economists in the latest Wall Street Journal forecasting survey.
The Wall Street Journal's latest forecasing survey showing economist believe about a quarter of the 8.4 million jobs eliminated since the recession began won't be coming back. Economics editor David Wessel and Barrons.com's Bob O'Brien discuss the results.
While the job market is constantly shifting as some sectors fade and others expand, this recession threw that process into overdrive. Thousands of workers lost jobs as companies automated more tasks or moved whole assembly lines to places like China. As growth returns, so will job creation—just with a different emphasis in the mix of jobs being created.
Economists in the survey are predicting a slow upswing for the economy as a whole. Respondents on average expect economic growth to settle at about 3% in 2010, off sharply from the powerful 5.7% seasonally adjusted annual growth rate in the fourth quarter.
This is why job creation has become such a worrisome issue: Based on that growth projection, over the next year economists estimate the U.S. will add about 133,000 jobs a month. That sounds good and it's certainly better than more job losses. But with about 100,000 new jobs a month needed just to soak up new entrants to the work force, that pace of job creation will only slowly reduce the high unemployment rate.
That's why the economists expect the unemployment rate to only fall to 9.4% by the end of the year—down from 9.7% in January. They say job growth needs to average more than 200,000 per month for the U.S. to see a strong recovery in jobs.
The White House released its economic forecast Thursday, projecting payrolls will increase by an average of just 95,000 a month this year with the unemployment rate averaging 10%. The Council of Economic Advisors expects GDP growth to be about 3% in 2010, in line with the surveyed economists.
It isn't just weak growth that's damping job growth. "Companies, in the name of making money, substitute against labor through outsourcing or technology," said Allen Sinai of Decision Economics. Wages and benefits make workers "so expensive that who wants to hire them? As a result, the displaced workers won't be rehired unless we have double the growth rate we're expecting."
On average, the 55 respondents, not all of whom answered every question, said three-quarters of the jobs losses during the recession are cyclical, meaning the positions will eventually return when demand picks up. For example, the manufacturing industry has shed 2.2 million jobs since 2007, as consumers and businesses cut spending sharply amid the credit crisis. When demand stabilizes, factories need to bring some of those workers back. Indeed, the sector added jobs in January for the first time in nearly three years.
But some companies have used the recession to find ways to do more with less. "There's a certain Darwinian angle to recession," said economist Sean Snaith of the University of Central Florida in Orlando, Fla. "Firms that survive are stronger for having the experience. They tighten down and look for ways to cut waste."
The challenges facing the economy—and the government's response to them—translated into low marks for President Barack Obama and Treasury Secretary Timothy Geithner. The economists gave the president an average grade of 57 out of 100, while Mr. Geithner scored an average of 60. Just 10 economists gave both men marks in the A or B range above 80. Despite the low marks, 29 of the economists expect Mr. Geithner will still be Treasury secretary at the end of the year.
J.P. Morgan Chase economist Bruce Kasman said, "You need to change incentives for hiring in a permanent way, but that is hard to do amid deficits."
However, Federal Reserve Chairman Ben Bernanke fares significantly better, with an average grade of 78, and 33 economists giving him an A or B. "The Fed chairman misread the economy and risks initially but eventually acted aggressively and successfully," said Jim O'Sullivan of MF Global. And despite a bruising confirmation battle earlier this month, most economists said the central bank's independence was only slightly undermined by the process.