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86k New Jobs Need To Be Added Every Month To Hold Unemployment Rate Steady In 2010: Asha Bangalore

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Exactly how many jobs will President Obama's new economic initiatives have to create to stabilize the economy?

In a research piece published yesterday, Asha Bangalore of Northern Trust, a Chicago-based financial services firm, predicted that the economy will need to add about 86,000 jobs per month next year to forestall growth in the unemployment rate. (Hat tip to Business Insider.)

Yikes. For some context, U.S. employers lost 11,000 jobs last month, according to the most recent government data.

The logic behind Bangalore's calculation is simple: the number of new people entering the job market would need to correspond to the rate of increase in employment. Over the past 20 years, population growth has led to an average annual increase in the size of the labor force of 1.2%. If 2010 growth is assumed to hold close to the historical average, almost 140,000 new jobs would need to be added every month next year in order for the two to balance. Bangalore explains:

"Based on the average growth of the labor force in the last 20 years, it appears that roughly 140,000 jobs have to be created each month in 2010 to meet the increase in the labor force. We computed this number by using the level of employment in the household survey for November 2009 (138.502 million) as the starting point and raised the reading by 1.2% (growth of the labor force). [Monthly increase in employment = 138.502 * 1.012=140.164, (140.164-138.502)/12 = 138,502 jobs per month]."

But because the labor force has historically expanded at a slower rate in the first year out of an economic downturn, Bangalore anticipates a lower-than-average growth rate in 2010, which brought his jobs-needed estimate down.

Read the full report here.


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