After recession's demolition, rebuilding the job market remains a slow go

Sometimes I think what’s occurred in the job market over the last three years is similar to what happens to single-family homes each week on Extreme Makeover: Home Edition.

A house that may have stood for 60 years gets turned into rubble in what seems like two minutes. Then, the rest of the TV show is spent constructing something new and improved on the site.

Think of the financial crisis-induced recession as the equivalent of a demolition scene during which eight million jobs got crushed. The plans and renderings could stand in for the many fix-it measures implemented by the Bush and Obama administrations and the Federal Reserve.

One thing we don’t see is Treasury Secretary Timothy Geithner with a megaphone yelling, “Move that bus,” to expose a shiny U.S. economy creating new jobs.

Unlike TV-land, our current economic reality is one of delayed gratification. In September, the National Bureau of Economic Research declared the recession that began in December 2007 was over as of June 2009, but the rubble of the job market remains strewn around us.

Compared with other areas of the country, the Philadelphia region did not fare too badly during the recession. Philip R. Hopkins, vice president of research at Select Greater Philadelphia, said employment here is down 4.4 percent since December 2007 compared with a 5.6 percent decline nationwide.

Fine, but what all of us crave to know is when to expect better days. For clues, economists turn to leading economic indicators, such as building permits or new orders for manufacturers - activities that tend to turn before the economy at large does.

Select Greater Philadelphia and IHS Global Insight have developed a regional leading index that now shows that a slow recovery began during the first quarter of 2010. Since hitting a value of 97.8 in April, the Greater Philadelphia Leading Index dipped to 97.4 in May and remained there until it slipped to 97.3 in August.

The actual numbers don’t matter. The flat trend line does, suggesting the next six to nine months will look a lot like the sluggish period we experienced from May through August.

To Hopkins, the message we should take from this is that recoveries from significant financial collapses are gradual. (He and I read the same book: This Time Is Different: Eight Centuries of Financial Folly by Carmen Reinhart and Kenneth Rogoff.)

The weaker the recovery, the weaker job creation will be. Economic forecaster IHS Global Insight now estimates that total employment in the Philadelphia region will not return to its pre-recession peak until the third quarter of 2013.

In the meantime, where might we see signs of life in the job market? A steady decline in initial claims for unemployment compensation and increase in the number of hours worked would suggest improvement, Hopkins said.

If retailers were to enjoy a solid holiday shopping season with consumers spending more than last year, that would help, Hopkins said. So too would be hard numbers showing an increase in bank lending and business borrowing.

Those may not be the ingredients for a Hollywood ending, but they might be teaspoons of hope in the grim industrial film we’ve been watching.