Busy day tomorrow, so unlikely to post much. Starting the day out with some early squawking—guest-hosting on CNBCs Squawk Box, 7-9am.
Also giving a talk later in the day on longer term concerns re job growth, as in how can we generate enough jobs, not just in the cyclical sense, like now, but over the next few decades?
I’ll have more to say on this when I’ve got some time, but these two charts have influenced my thinking a lot.
The first one shows the long term trends in productivity and employment growth. People sometimes worry that we’re getting too productive, able to satisfy the demands of our economy with “too few” workers. That’s an age-old worry, and those who want to downplay it cite the fact that, as the graph shows, there is a positive, not a negative, correlation between productivity and job growth overtime.
But look at the end of the graph. Productivity accelerates while employment growth decelerates. And that ain’t no blip either…it suggests the possibility of a structural change in this relationship.
As usual, lots of other stuff was going on there too—financialization, for one: the ramp-up of the financial market craziness that helped inflate the housing bubble. Increasing inequality, bad tax policy…so a lot to sort out here. But it’s a big hint as to how to start thinking about the problem of not enough job creation.
Here’s the second hint. I basically copied this from a neat graph in the Washington Post; it’s just all the jobs sectors—construction, manufacturing, services, etc.—indexed to 100 in January 2007 and plotted through last month.
I didn’t bother labeling every sector because I just wanted to make one simple point. Look at health care/education (which is driven by health care). Even throughout the worst recession since the Great Depression, with payrolls tanking worse than I’d ever seen, HEALTH CARE ADDED JOBS EVERY SINGLE MONTH.
The graph makes the point…um…graphically. It’s a straight line sloping steadily up amidst all that carnage!
So there’s the other hint. This is a sector with great demand, tough to outsource, strong gov’t involvement (and yes, unsustainable spending—and that’s not solely a public sector issue; it’s just as bad on the private side), and limits to productivity growth, relative to say, widget production.
I’ll explain the hypothesis this leaves me with in later posts, but for now it’s got me wondering: is Baumol’s disease part of the cure?
(I apologize if this sounds cryptic–just saying that the fact that service sector productivity growth naturally lags that of manufacturing may be more of a friend than an enemy. Like I said, more to come on this.)