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Policy

Without Jobs, Is a Recovery for Real?

Private-sector jobs remain below their previous high for an unprecedented 51 months

by BY MICHAEL HEYLIN
May 9, 2005 | A version of this story appeared in Volume 83, Issue 19

Over the 30 years between 1970 and 2000, private-sector jobs in the U.S. grew, according to the Bureau of Labor Statistics (BLS), from 57.9 million to what is still the all-time high level of 111.7 million set in December 2000. This works out to an average annual growth of 2.2%.

If this growth rate had been sustained for the next four years, jobs would have risen by another 10.2 million to 121.9 million by December 2004. Instead, they dropped by 1.0 million to 110.7 million. By this March, at 111.2 million, they were still a half-million shy of the peak. This all amounts to an apparent 51-month shortfall of 10.7 million jobs since the end of 2000.

A substantial part of this virtual employment deficit can be attributed to the recession that, as measured in terms of the gross domestic product (GDP), lasted for the first three quarters of 2001 and was relatively mild.

This setback was unavoidable. It came as the 1990s' boom finally ran out of steam and some economic bubbles burst. This had been the longest and strongest economic upsurge in U.S. history. It boosted private-sector jobs by 21 million between 1992 and 2000.

In the past, however, 51 months has been more than enough time for private-sector employment to recover from recession-related losses and push into new high ground. Fifty-one months after each of the four earlier job peaks since 1970, private-sector employment had moved up by an average of more than 5 million.

What is different this time? What is the implication for those in the workforce of a domestic private sector that is advancing solidly in GDP terms, has returned to respectable financial performance, and, yet, has generated no gains in jobs for what will soon be approaching five years? GDP was up by 4.4% in 2004, and it grew at a still reasonable 3.1% annual rate in the first quarter of this year.

A search for clues and answers to these questions among the myriad employment data generated and published by BLS every month yields mixed and somewhat ambiguous results. But none of them contradicts the scenario of unprecedented--at least since World War II--weakness in the job market since 2000.

With employment still below the 2000 peak, the private-sector data yield the gloomiest picture. But data on the total number of people on payrolls, gathered by BLS from a sample of 400,000 employers each month and generally considered reliable, isn't much better. Payrolls did not finally regain their four-year-earlier level until this January.

Total employment, as measured by another BLS monthly survey of a sample of 40,000 households, does show a 2.7 million increase over the past four years. This measure of employment has been flat for the past five months, however. And, by historic standards, the rate of gain over the past four years of an average of less than 700,000 jobs per year is low. It is well under the about 2 million annual increase needed to keep up with natural growth in the workforce.

Employment data on workers 25 years and older and with at least a bachelor's degree, like most chemists, have a more positive spin. They show a 3.3 million increase in the employment level between December 2000 and December 2004--from 36.5 million to 39.9 million.

The nexus of the recent job losses has been manufacturing. Such jobs peaked in 1979. They declined steadily in the 1980s and stabilized somewhat in the 1990s. They have dropped precipitously since then, having fallen from 17.2 million in December 2000 to 14.3 million this March. This is a drop of 17%.

Over the same period, the decline for the nonpharmaceutical sector of the chemical industry has been from 699,000 employees to 589,000, or 16%. The drop from December 1992 had been from 797,000 to 589,000, or 26%.

As yet unknown is the impact of noneconomic factors on employment over the past four years. These factors include the 9/11 attack, the Afghan and Iraq wars, the war on terrorism, and confidence-sapping corporate scandals. Maybe, in light of these, employment hasn't really done too badly.

Of longer term concern are possible changes in the balance among capital, investment, labor, science and technology, and a generally enlightened government that has served this country so well.

The system has been that the private sector invests capital and employs people to generate products and services and make a profit. Science and technology improve efficiency, which can tend to reduce employment. But it enhances profit, which is reinvested in activities to develop new products and services. These, in turn, generate more capital, more investment, and many more new jobs than were lost.

It has worked, with relatively short periods of employment decline followed by far longer periods of job growth.

But the new experience of little or no job growth for more than four years raises a question: Have recent electronic and other technological advances, which have greatly expanded the labor pool for the jobs that need to be done to serve the U.S. economy, started to undermine the traditional role and standing of domestic labor?

Maybe not. But there will be a big sigh of relief when the job market in this country unambiguously enters a new growth phase.

 

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