The Real Story on Peak Jobs: Ritholtz Chart

Barry Ritholtz is a Bloomberg View columnist. He founded Ritholtz Wealth Management and was chief executive and director of equity research at FusionIQ, a quantitative research firm. He blogs at the Big Picture and is the author of “Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy.”
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Source: FRED, St. Louis Federal Reserve Economic Data

Here is an interesting question: How does the present employment rate compare with the prior peak?

According to Bureau of Labor Statistics data, if we compare the prior recent peak of 139,143,000 of November 2007 with last month's figure of 137,942,000 (I used non-seasonally-adjusted because it's November to November), we are still 1.2 million or so below the earlier highs. This suggest that by May or June 2014, the recovery will pass previous top levels. (Perhaps it's noteworthy that women have already passed their prior peak employment).

But let's look at this differently. What if we back out all of the artificially driven employment that has disappeared? If that is the case, we have probably already passed the prior "reality adjustment peak employment" -- months ago. That is, remove the real estate agents, mortgage brokers, subprime securitizers, construction workers, etc., of the bubble and you end up with much more modest numbers.

For example, in April 2006 construction jobs peaked at 7,726,000 ; the current figure is 5,851,000, according to the Federal Reserve of St. Louis. Back in 2005, we noted the "Bull Market in Real Estate Agents." According to the National Association of Realtors, the peak number of agents was 1,363,493 in July 2007. Today, the figure stands about 25 percent lower, at 1,046,278.

Not that the current employment situation is completely natural. The Fed is driving some job creation. Although plenty of people complain that the current course of quantitative easing is not a big job producer, it does have an impact on sectors such as autos, homes, indeed anything purchased with credit.

Further, we don't know the counterfactual -- what would the U.S. employment situation look like in the absence of QE? Most likely, somewhat to significantly worse.

The impact of artificial stimulants during the 2007 peak was in all likelihood much greater than at present. Hence, we can make a guess that employment may already be somewhat higher than the pre-2008 recessions highs, ex-bubble.

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Barry L Ritholtz at