You can call it the mystery of the missing jobs, 15 million of them according to a report appearing this weekend inThe Atlanticmagazine that implies that sometime over the past decade something went horribly wrong in our nation’s ability to create jobs.
According to the report written by Jim Tankersley something happened in the years between the brief 2001 recession and the 2008 financial collapse that stymied job creation. While those years produced tremendous growth in our gross national product, soaring corporate profits, and a low unemployment rate, job creation lagged behind at a rate not seen since World War II.
Tankersley adds that when the Great Recession came it wiped out what amounts to every U.S. job created in the 21st century.
But even if the recession had never happened and the economy had simply treaded water, he maintains that the United States would have entered 2010 with 15 million fewer jobs than economists say it should have. And, according to Tankersley, no one seems to know exactly why.
Economists will point to rapid advancements in technology, outsourcing and the opening of new international markets as pulling jobs away from our borders. He writes that “an economy that long thrived on its dynamism, shedding jobs in outdated and less competitive industries and adding them in innovative new fields, fell stagnant in the swirls of the most globalized decade of commerce in human history.”
All we know is that in the first decade of the new millennium, the U.S. economy created fewer and fewer jobs than originally predicted. Tankersley says turnover in the job market slowed as workers clung to the positions they held. Job destruction spiked in each of the decade’s two recessions. In contrast to the pattern of past recessions, when many employers recalled laid-off workers after growth picked up again, this time very few of those jobs came back.
In his report, he writes that “we know what should have transpired over the past 10 years: the completion of a circle of losses and gains from globalization. Emerging technology helped firms send jobs abroad or replace workers with machines; it should have also spawned domestic investment in innovative industries, companies, and jobs. That investment never happened—not nearly enough of it, in any case.”
Fed warning
David E. Altig, senior vice president and research director for the Federal Reserve Bank of Atlanta, is quoted by Tankersley as giving this warning: “If we can’t figure out why, we may be doomed to a future that feels like a long jobless recovery, no matter how fast our economy grows.“
Tankersley says that at the turn of the millennium, the Bureau of Labor Statistics predicted that the U.S. economy would create nearly 22 million net jobs between 2000 and 2010 as economists predicted “good opportunities for jobs” and “an optimistic vision for the U.S. economy.”
That didn’t happen. At its peak says Tankersley, job growth was only 7 million, some 15 million less than forecast and the lowest of any decade ever recorded by the federal government, stretching back to the 1940s. .
Meanwhile, the nation’s population grew faster than the labor force. In 2008, about 63 percent of working-aged Americans held a job, down from 65 percent in 2008, reversing decades of improvement in the employment-population ratio. Real middle-class incomes fell from 2000 to 2007—from a median of $58,500 to $56,500 another first in U.S. record-keeping.
What’s interesting is that the national unemployment rate stayed low, between 4 and 6 percent, until the financial crash. But Tankersley says the rate was low not because the economy was adding a lot of jobs, but because fewer people were joining the workforce, especially fewer women. He adds that lawmakers and economists were blinded by low unemployment and overlooked two crucial warning signs of the nation’s deteriorating economic health. One was the percentage of working-aged men who held a job. The other was the number of jobs being created each month. Throughout the 2000s, both numbers nose-dived.
Displaced
Mark Thoma, an economics professor at the University of Oregon who writes the Economist’s View blog says that a lot of people have been displaced due to technology and outsourcing. He adds that those workers have often settled into worse jobs than the ones they lost, if they have found work at all.
David Autor, the associate chairman of the Massachusetts Institute of Technology’s economics department says globalization has effectively “hollowed out” much of the country’s middle-skill jobs—assembly-line, call-center, and bookkeeping occupations, for example—and replaced them with a computer or a lower-paid foreign worker.
Tankersley says Autor is pioneering the research into what he calls the “polarization” of American jobs into low- and high-skill camps, but even he isn’t sure whether his findings explain how 15 million jobs disappeared.
Tankersley says one baffling aspect of the current recovery is why U.S. companies continue to sideline nearly $2 trillion in cash instead of using it to buy equipment or hire workers. That hoarding turns out to be a piece of a decades-long investment puzzle. He says American corporate spending on nonresidential plant equipment — factories and equipment, not houses or shopping malls — has fallen to its lowest rate as a share of the economy in 40 years and adds that businesses aren’t investing in American workers, either.
A recent paper by researchers at the Asian Development Bank Institute concluded that the iPhone, one of the United States’ top innovations of the past decade, is almost entirely produced and assembled in Asia. The paper also raises a conundrum for lawmakers and business leaders alike: If Apple moved its assembly line to the United States and created domestic jobs but didn’t raise the cost of the iPhone, the company would still turn a 50 percent profit on every one it sold.
Tankersley says the harsh reality is that workers, companies, and lawmakers all need to readjust if we ever hope to rev up the job-creation machine again. Or, it may be that Washington must take bolder steps to encourage higher-risk, higher-reward investments by companies.
This week President Obama appointed the CEO of GE Jeffrey Immelt to take over as head of the President’s Council on Jobs and Competitiveness, replacing Economic Recovery Advisory Board. Immelt wrote in an op-ed in the Washington Post today about how the U.S. should create jobs to coincide with the President's announcement. He lists three priorities to focus on: Manufacturing, trade, and innovation.
