The case of the missing jobs
Doing the math. This is all part of a massive leakage from our economic system that could render the traditional multiplier effects of higher employment unavailable to millions. It also underscores in a most disturbing way the weaknesses inherent in the current economic upturn. The migration of millions of service jobs is a critical challenge to the once unstoppable American job machine. It may very well be the defining economic challenge of the next decade.
There is no doubt that the Great American Job Machine has simply not kicked back into gear. The optimists look at the declining levels of first-time unemployment insurance claims, improved sentiment among purchasing managers, a pickup in employment in the services area--especially temporary employment--and increased corporate profitability and confidence. They hope businesses will soon deliver on job creation. But that hasn't happened, and it won't happen. What is happening is a spectacular improvement in productivity, which has more than accounted for the economy's total growth since the recession ended. Productivity gains, alas, are also the cause of so many jobs disappearing. With worker productivity growing at 4.8 percent in 2002 and probably at over 5 percent last year, the average increase in productivity over the past decade has climbed over 3 percent--twice the average rate of the two previous decades. Add an annual increase of 1 percent to the labor force and you have to have an economy growing at least at 5 percent a year for payrolls to expand. This would be unprecedented. As long as far fewer employees can churn out more and more complicated products than before, the number of workers or the hours they work simply has to fall. Look at steel production. It has increased over the past two decades, from 75 million tons in 1982 to 102 million tons last year, with a considerably higher degree of product complexity. Yet the number of steelworkers has dropped in that same period by almost 75 percent.
Productivity has at least succeeded in lifting profits and stock prices. This has produced a boom on the capital side of the economy, but not on the labor side, for it has not yet increased either jobs or workers' pay. This has been masked in part by tax cuts, by a huge buildup of personal debt, and by the extraction of money from the increased value of assets, especially homes, made possible by record low interest rates.
In order to continue our tradition of creating more new jobs to replace the old ones we destroy, we are going to have to rely on more than dramatically stimulative fiscal and monetary policy. We're going to have to do a better job of preparing more and more of our citizens for knowledge-based employment, especially through increased K-to-12 education. Happily, there is reason to hope. We have a remarkably hardworking, entrepreneurial population and a bottom-up economy responsive to energy, talent, effort, and new ideas. Our universities are the envy of the world. Our post-university, on-the-job training in business is unsurpassed. But it is clear that we are going to have to think hard about jobless economic growth. How that is managed will be critical to our nation's economic policies, including its trade policies. As New Hampshire demonstrated, it will also be a critical component of our politics.
According to the polls, New Hampshire voters supported John Kerry because they felt he was the best man to be able to stand up to President Bush on issues of national security. But look closer and you'll see they really want someone to challenge the president on the gut issues they really care about, namely, jobs and healthcare. As New Hampshire goes, so goes the nation.
advertisement
