Recession will end before the job losses

The recession will likely end well before the job losses, as was the case in the last recession. The process of creating jobs is a rather slow one. The dollars from fiscal stimulus will likely initially result in a jump in spending by businesses who directly receive the stimulus, an increase in overtime, and an increase in hours for workers who had hours cut back over the past year. Companies will resume hiring only after they can no longer produce output using existing staff. All of that initial spending will show up in GDP, but without a bump in jobs. Meanwhile, companies that are not getting that stimulus or seeing a bump from the spending of that stimulus will continue shedding jobs for months to come. Eventually the flow of stimulus money will reach the remaining surviving companies and they will be able to resume hiring or at least slow down their cutting of jobs.

Also, a hefty chunk of the stimulus will merely "save" jobs, such as aid to local and state governments which permit them to continue spending without the need to fire more workers. That spending will quickly show up in GDP, but without a corresponding bump in jobs, at least initially.

The simple point is that jobs will not be the leading indicator of the end of the recession.

I would not be surprised if it took four to nine months after the start of stimulus spending before we start seeing significant job gains.

-- Jack Krupansky