The blogosphere is buzzing over Michael Mandel's piece from BusinessWeek depicting a graph that shows job growth in the private sector has been generally declining over the past decade. He calls it a "lost decade" during which time the private sector job machine had "almost completely stalled." I find this a little melodramatic if you think about the data in a larger context.
First, let's look at Mandel's chart that so many find so scary:
Clearly, lots of jobs have been lost since 2007, since we're in one of the worst recessions in at least a few decades. Let's look at historical unemployment for the same time period as Mandel's chart:
You can't miss the recessions: they're the giant spikes that go up, and then come back down. That's how recessions work. They cause unemployment, and then the economy recovers. Our recovery might be a little more gradual than some in the past, but it will be a recovery nonetheless. I think it can be kind of misleading to consider those years in a job growth analysis, since those jobs are not lost forever.
It's also kind of obvious that a private sector job growth graph would exaggerate job losses in the current recession, since employment in the private sector always does worse than the public sector during recessions. The government isn't nearly as concerned about its bottom line, so has less need to lay off workers.
Still, even before 2007, the private sector job growth since 1999 looks bad. Why is that? Let's magnify my chart for the last 20 years:
Up until 2007, during the supposed "lost decade," other than during the relatively minor recession following 9/11, the U.S. had extremely low unemployment -- generally between 3% and 5%. Most economists I've talked to would call this pretty close to the natural level of unemployment. That means it's very hard to do much better. As a result, I'm a little unclear where this supposed missing private sector job growth could have manifested itself if things had been different.
I wonder if the lack of job growth could have something to do with a slowdown in population growth, or hordes of baby boomers retiring and the new population taking their jobs instead of needing new ones. Since unemployment remained so low for most of this time, there must be a better explanation other than proclaiming that private industry is dead in the U.S.
I'm also not sure why I should care. If unemployment remains between 3% and 5%, then I'm not that concerned about job growth, because pretty much anyone who really wants a job has one. If a nation is fully employed other than the natural rate of unemployment, who is left to take advantage of new jobs? My only guess would be Bigfoot.
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