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TheStreet Open House

How Many Jobs Do We Need to Hit 5% Unemployment?

Unemployment Calculator



NEW YORK ( MainStreet) -- Wondering what it would take for the labor market to return to the 5% unemployment rate we had just before the recession hit in 2007? A new online tool can help you find out.

The Federal Reserve Bank of Atlanta introduced a calculator this week that predicts the number of jobs the economy would need to add in a given period to reach a target unemployment rate, based in part on the most recent data from the Bureau of Labor Statistics on the current rate of labor force participation and population growth.

Assume the economy continues to add 230,000 to 240,000 jobs a month and that labor force participation remains the same and it would take about 34 months to hit 5% unemployment, or basically until the end of 2014.

For example, users can enter the target unemployment rate of 5% and set the timeline for one year. Based on these two data points, the calculator predicts the economy would have to add an average of 485,067 jobs each month to reach that goal -- certainly wishful thinking considering that the economy has added about half that number in each of the past two months.

If we assume the economy would continue to add 230,000 to 240,000 jobs a month as it has done recently and also assume that the labor force participation rate remains the same -- two very generous assumptions -- it would take about 34 months to hit 5% unemployment, or basically until the end of 2014.

In the more immediate future, the magic number to look for may be 172,121, which is the average number of jobs that the economy would need to add in each of the next six months to bring the unemployment rate below 8% before the presidential election in November. To be sure, 7.9% unemployment isn't exactly anything to brag about, but the number does have symbolic value for the Obama administration and would show that the economy is on the right track.


Then again, a better number for the president to shoot for would be 341,157 - that's how many jobs would need to be added on average in each of the next six months to bring the unemployment rate to 7.2%, which was the unemployment rate when Ronald Reagan won his re-election in 1984. No incumbent presidential candidate has won re-election with a higher unemployment rate than that since Franklin Delano Roosevelt did it in 1936 and 1940.

(Hat tip to @TheStalwart and @ModeledBehavior for pointing out this calculator)

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