Oct. 7 (Bloomberg) -- For the first time in three decades, a U.S. recession may wipe out all the jobs created during the previous expansion, according to Ed McKelvey, a senior economist at Goldman Sachs Group Inc. in New York.

Pending payroll revisions and the likelihood that employment will keep dropping in coming months mean the 8.3 million jobs created from 2003 through 2007 will be lost, McKelvey wrote in an Oct. 6 note to clients.

The only other time that’s happened in the post-World War II era was during the “aborted” recovery sandwiched between the 1980 and 1981-82 recessions, McKelvey said. “The current situation is obviously quite different,” he wrote.

The payroll count in September stood just 1.13 million above the August 2003 trough reached in the aftermath of the 2001 contraction. About 824,000 more jobs may be subtracted from the count for the 12 months through last March when the figures are officially revised early next year, a preliminary Labor Department estimate showed last week.

Goldman’s research shows a “loose” relationship between the direction of that revision and adjustments to payrolls in the following months, McKelvey said.

“Coupled with the size of the upcoming revisions, this suggests fairly strongly that the benchmark revision next February is likely to include a downgrade of the trend in payrolls since March,” he wrote.

300,000 ‘Cushion’

With a “cushion” of only about 300,000 remaining, the probability is “high” that all the jobs created during the expansion will be lost, he said.

A Labor Department official last week attributed the projected change in the employment count to the inability of the government’s statistical projections, known as the birth/death model, to measure swings during intense contractions such as the one that occurred in the first three months of this year.

The calculation tries to estimate how many jobs are created by newly formed companies and how many are lost as businesses go out of business, two groups the government has difficulty sampling.

McKelvey said that doesn’t mean the model should be scrubbed.

“It does, after all, do well in most years,” he wrote. “But it does suggest that efforts to take account of the cyclical nature of net business formation could improve the performance of this controversial process.”

To contact the reporter on this story: Carlos Torres in Washington ctorres2@bloomberg.net

Last Updated: October 7, 2009 10:17 EDT