Nobel Prize-winning economist Joseph Stiglitz, in an op-ed in the Financial Times, despite all of the happy talk about last week Bureau of Labor Statistics Employment Situation Report, is unhappy with the state of the U. S. labor market as well he should be:
In Friday’s US employment report, the proportion of working-age American adults in a job moved up only 0.1 percentage points, to a miserable 58.6 per cent – numbers not seen since the downturn of the early 1980s. There are still 23m Americans who would like a full-time job but who cannot get one. The jobs deficit, the number of extra jobs that would have been required to keep up with new entrants to the labour market, is 15m. Employment has yet to return to its level of December 2008. Male employment is still below what it was in February 2007 – meanwhile, the working-age population has grown considerably.
Let’s assume that job creation continues at the rate of 225,000 jobs a month. That is only about 100,000 beyond the number required to provide jobs for the average monthly number of new entrants into the labour force. At that pace, it would take 150 months to reach full employment – 13 years, some time around 2025. The independent Congressional Budget Office is more optimistic, forecasting the return of full employment by 2018.
Read the whole thing. He goes on to list three missing elements in demand: the perverse savings situation that prevailed in 2007, the abnormally large proportion of total investment going into housing, and the budget constraints on state and local governments. He follows that with three risks:
- A steeper European downturn;
- Complacency that the economy will just recover on its own;
- That 7% unemployment will come to be seen as acceptable.
to which I might add or a declining labor force participation rate will come to be seen as acceptable.
This is a plea for more fiscal stimulus on Dr. Stiglitz’s part. I’m afraid he would be disappointed at the results.
I did get a good laugh out of his conclusion:
If my Cassandra forecast turns out to be wrong, stimulus can be cut.
Can anyone give an example in which a fiscal stimulus once enacted into law was repealed because it was deemed unnecessary?
I don’t think the prospects are good. Tying this in with some earlier posts of mine employment in the goods producing sectors of the economy have been in a long secular decline. Increasing employment in government is unlikely to produce a more-robust self-sustaining recovery unless, of course, we’re prepared to make that employment last forever. Then you’re faced with the cat-and-rat farm perpetual motion problem.
A good deal of the increase in employment in the services sector has been in healthcare which now accounts for more than 10% of total employment. That, too, is largely financed by the government.
Derek Thompson underscores the point at The Atlantic:
The labor market is in full-blown recovery mode right now, with the economy adding more than 200,000 net new workers each month for the past three months. At this rate, we’ll close the jobs gap in roughly … eight years.
Yep, that is the conclusion from Michael Greenstone and Adam Looney at the Hamilton Project. Today the country faces a 11 million-person jobs gap. This “jobs gap” represents the number of jobs that the U.S. economy needs to return to pre-recession employment rates while also (this part is key!) absorbing everybody joining the labor force.
He has a nifty graph illustrating employment growth under three different scenarios: with the rate of new job creation equal to the average rate during the 2000s, equal to the average rate during the 1990s, and equal to the maximum rate during the 00s.
I would add that in the post-war period the average duration of an expansion has been 59 months. We’re 33 months into the present expansion.