Tuesday, July 18, 2017

The Growing Job Creation Conundrum in the United States

During the 2016 presidential election cycle, many of the key candidates touted their programs to create jobs for Americans, a promise that was particularly dominant in Donald Trump's campaign. In this posting, I want to look at a recent analysis by Ryan McMaken at the Mises Institute, a non-political, non-partisan institute that promotes teaching and research in the Austrian school of economics, looks at the of-cited line that the United States' economy has created millions upon millions of jobs since the last recession.  Here is a summary.

While total U.S. employment has risen from a low of 127.9 million workers in 2009 to its current level of 146.4 million workers in July 2017 as shown on this graph:

...as you can see, 10.5 million of these jobs simply replaced the jobs lost during the Great Recession.  Prior to the Great Recession, the total number of non-farm jobs peaked at 138.4 million.  This means that, on a net basis, the past eight years of economic expansion have only created 8 million new jobs.  As well, we have to consider that the non-farm payroll numbers that are reported on a monthly basis are not reporting the number of "employed persons", rather, they are reporting the number of jobs.  This means that a single person that is holding down two part-time jobs to make ends meet still counts as two jobs.  As a result, while the total number of jobs may be increasing, the total number of employed persons may not be increasing.

Now, let's look at a graphic that shows the rate of non-farm payroll job creation for each economic cycle in the United States going back to the mid-1970s:

It's pretty clear that the economic expansion since the end of the Great Recession has experienced the lowest job growth rate of the past four decades.

The post-Great Recession job situation looks even worse when we compare the percentage growth in jobs between economic peaks to the percentage growth in the population of working age Americans as shown here:

And, to add fuel to the fire, the number of months that it has taken for the economy to recover the jobs lost during the latest recession far exceeds the time taken during the prior three recessions as shown on this graph:

After the 1981 - 1982 recession, it only took 33 months to recover the jobs lost.  In the recession of the early 1990s, it took 36 months and in the recession of the early 2000s, it only took 48 months.  This compares to the 78 months that it took during the post-Great Recession recovery.  Looking at the full recovery period (i.e. from the recession low to the recovery high), the numbers look even worse as you can see:

1.) 1981 to 1990 - by 1990, there were 18 million more jobs than the peak in 1981.

2.) 1990 to 2000 - by 2000, there were 22 million more jobs that the peak in 1990.

3.) 2000 to 2007 - by 2007, there were 6 million more jobs than the peak in 2000.

4.) 2007 to 2016 - by 2016, there were 8 million more jobs than the peak in 2007.

Keeping in mind that the economy is statistically overdue for a recession and that the global economy is weak at best, job creation may be near or at its post-Great Recession peak.

This analysis by Ryan McMaken suggests that the Trump Administration will find it very difficult to     create a significant number of new jobs.  The historical trends of the last four post-recession recoveries show just how difficult it will be to create a sufficient number of new jobs to keep American voters happy.

1 comment:

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