Nationally, the economy will probably grow this current quarter — but at less than a 1 percent pace, said Dhawan. The economy will likely shrink at a similar pace in the next quarter, he said.
Job growth typically does not start until recession ends and the economy starts to expand. The weaker the expansion, the longer it may take for hiring to kick in and unemployment to fall. After the end of the 2001 recession, for example, job growth did not start for more than a year.
For job-seekers and consumers, that means a lot more bad news, he said. “The fallout is far from over when viewed through the prism of job loss rates and income growth.”
Nationally, more than 6 million jobs have been lost thus far in this downturn. Payrolls will shrink by several million more jobs during the remainder of this year and next, Dhawan predicted.
Georgia, where job growth was especially strong in sectors related to real estate, the burst of the housing bubble has been traumatic. The state, which has become a trading center for the Southeast and globally, has also suffered from loss of trade-related jobs.
Meanwhile, manufacturing — which has lost jobs for a decade — has continued its long, painful slide.
The mix has been toxic.
Georgia slipped into recession in late 2007 and started shedding jobs before the national downturn began. And by the time a tepid job growth starts again — in 2011 — the state will have lost a stunning 360,000 jobs, Dhawan said.
That is roughly one of every dozen payroll positions — gone.
To fuel growth and hiring, the state needs investment, building and consumer buying power — and all are lacking, Dhawan said. “Tech investment growth, a critical predictor of job growth, is still nonexistent, and new construction activity is running at a shadow of its former self.”
The state of Georgia is on a long road to economic recovery following its decline into recession even “before the national downturn began”. Its unemployment rate is constantly rising as the economy suffers from loss of real estate and manufacturing related jobs. Approximately “one of every dozen payroll positions” is estimated to be lost by the time job growth starts again.
The individuals who are willing and able to work but are unable to find a job, the unemployed, are eligible for certain state benefits if actively searching for employment. However, economic output in the economy is lower during this time. The longer people are unemployed, the more liable they may be to weaken in skill and, consequently, waste productive potential. The production possibility curve alongside demonstrates Georgia’s inefficiency as they are producing at point A rather than at point B. That is to say that they are producing less than the possible output level rather than at the possible output level. Furthermore, unemployment leads to decreased expenditure as residents are unwilling to spend whatever is left of their disposable income. As a result, the government will collect less revenue from sales tax.
The workers that lost their jobs in sectors related to real estate will eventually get their jobs back once the economy experiences higher levels of economic activity. These individuals are, for the moment, cyclically unemployed. Cyclical unemployment is a type of unemployment that occurs when an economy is at the trough of its business cycle. Point A of Figure 2 is positioned at the trough which illustrates the point where an economy experiences low levels of economic activity. In times of recession, aggregate demand decreases leading to a decrease in economic activity and a decrease in real output. The lower level of economic activity causes industries to decrease their demand for labor. Figure 3 illustrates the market for labor during a recession. The demand for labor will decrease from Q to Q1. The distance from point A to point B represents the quantity of cyclical unemployed people. As the economy moves towards point B in Figure 2, the peak of its business cycle, employment for these individuals will be restored.
Less fortunately for the workers that lost their jobs from the manufacturing industry, they may not be able to get their jobs back because they are structurally unemployed. This means that there has been a change in the structure of the economy and these jobs are permanently lost. So, these individuals must search for a new type of job but might find this difficult as the skills they are able to offer are unlikely to be the skills required by the new labor market. As a result, the government could do two things: create new job opportunities in Georgia and give an incentive for the unemployed to return to educational programs or vocational training. The government must create new job opportunities so that residents do not depart in hopes of finding a new job elsewhere and, in turn, cause the state to lose its socioeconomic status. However, for this to be possible, aggregate demand must be high enough to encourage firms to expand their workforce.
For the meantime, educational programs would provide individuals with an opportunity to develop their skills and learn new skills. This would increase the value of each worker, and in the long-run, should be a factor in increasing efficiency in the economy again. Nonetheless, the government would be required to fund these programs somehow which may be problematic due to the already existing loss of tax revenue and government spending on unemployment benefits. Another problem is that it may be difficult to decide which fields to train people in as new job opportunities have not yet been created. There will always a possibility that people will be trained in the wrong fields or that they are unable to develop certain skills any more than they already have. The only thing that is for sure is that if the government is unable to provide some way for them to obtaining wages then the state may start to experience higher levels of crime and violence as the unemployed become desperate to find an alternative source of income.
