According to a new Watson Wyatt analysis, the amount of “surplus labor” available as the economy recovers is at the lowest level it has ever been over the past 10 recessions.
Surplus labor is the number of unemployed workers above a 4% unemployment rate (which is generally considered the “full employment” mark) plus new entrants to the workforce (such as recent college graduates) available over the 24 months following the low point of a recession, Watson Wyatt researchers said.
“Any way you look at things, we are facing extremely tight job markets once the economy picks up steam,” Sylvester Schieber, Watson Wyatt research director, said in a statement.
The Recession’s Low Point
Roughly 2.9 million Americans were unemployed in February 2002, which the analysis assumed to be the low point of the current economic downturn.
That number is well below the number of unemployed during recent recessions – for example, 7.5 million were unemployed at the low point of the 1982 recession, and 3.5 million were unemployed in the 1990 downturn, Watson Wyatt said.
But given that the size of the workforce has grown steadily over the years, the current number of unemployed looks even more modest relative to the overall size of the workforce. The unemployment rate above the 4% full-employment mark was just 2.0% in February 2002, compared with 2.8% in 1990 and 6.8% in 1982, Watson Wyatt said.
But the gap grew even wider when Watson Wyatt factored in potential new entrants into the workforce in the 24 months following the low point of each downturn.
With that included, the amount of surplus labor stands at just 3.7% this time around, compared with 4.7% in 1990 and 9.6% in 1982.