Tyler Cowen and Arnold Kling both linked to a National Journal article that implied America had lost (or failed to create) 15 million jobs in the last decade, even apart from the effects of recession. Go back to April 2008, when unemployment was a quite low 4.9%. The claim is that even then we were suffering from 10 to 15 million missing jobs. The data is a bit vague, so it’s not clear exactly how many:
The Great Recession wiped out what amounts to every U.S. job created in the 21st century. But even if the recession had never happened, if the economy had simply treaded water, the United States would have entered 2010 with 15 million fewer jobs than economists say it should have. . . .
The forecasters said [in 2000] that the economy would create 22 million jobs over the next 10 years. At the decade’s economic peak, though, that number stood at only 7 million. Job growth in the 2000s was the lowest of any decade ever recorded by the federal government, stretching back to the 1940s. As a result, workers were extremely vulnerable to the tidal-wave recession that washed away all of the decade’s meager gains.
How could that be? As a matter of pure arithmetic, missing jobs imply one of two things, a huge rise in unemployment, or a huge fall in the labor force participation rate. Can you think of a third factor?
Since unemployment was only 4.9% in April 2008 (i.e. normal) there should have been a huge drop in the LFPR between 2000 (which was a red-hot boom year), and 2008. Yet according to this graph, it looks like the LFPR merely edged down from about 67% to 66% between 2000 and 2008. I’m surprised the decline was that small, given how the dot-com boom sucked anyone who could tie their shoelaces into the labor force. Remember what fast food help was like back in 2000?
I notice that the LFPR rose sharply between the 1960s and 1990, I’d guess due to more women working. Then it leveled off at about 66.5% during 1990-96. Then it rose to 67% during the dot-com boom of 1998-2001. Then it dropped to 66%, and leveled off until 2008. Aren’t there lots of possible explanations for this tiny drop in the LFPR? Recently I’ve noticed more adult women who could be working, but choose to stay home. I don’t know if that’s a trend, but Jim Tankersley doesn’t provide us with any of the data we’d need to make sense of the claim about missing jobs. He may be completely correct; I just can’t see where the numbers come from.
Now if you go up to 2010, then yes, I do see a worrisome loss of jobs. This shows up as both much higher unemployment (perhaps 8 million lost jobs), and a bigger drop in LFPR (another 2 million lost jobs), both obviously related to the late 2008 plunge in GDP. I just don’t see evidence that we had a massive jobs problem before the recession. Does anyone know what data can support Tankersley’s claim, and why it doesn’t show up in either the LFPR, or the unemployment rate in April 2008?
I still think our unemployment problem is about 80% AD and 20% structural problems (99 week UI extension, 40% minimum wage jump, etc) but I have an open mind on the proportions.