Friday, June 3, 2011

More on jobs

Today's employment report is a bummer, with the economy adding a mere 54k jobs in May after three months in a row of 200k+ growth.  One always must be careful not to read too much into one month worth of data, especially with the disruptions attributable to the Japanese eathquake/tsunami and the spike in oil prices. 

A bigger concern is the underlying rate of job creation, points out WP columnist Steven Pearlstein who writes today about the research of Maryland economist John Haltiwanger.  Haltiwanger is the nation's leading expert in job creation and destruction; he was the first to show that we routinely create AND destroy between 15 and 17 million jobs each year.  In the Great Recession we saw job destruction numbers climb while job creation numbers nosedived.  The job destruction numbers have returned to their long term trend value, but the job creation numbers have yet to recover.

Haltiwanger's research shows that young firms play a key role in the job creation process.  So far the economy has lagged in terms of new firm creation as well as job growth within new firms.  The big question, which his research has not yet addressed, is "why?"  Doctrinaire Keynesian economists will argue there was not enough stimulus, whereas the free-market types will get all worked up over Obamacare and the evils of budget deficits.  But maybe the real problem is microeconomic?  Some possibilities mentioned by Haltiwanger and Pearlstein: large national chains have made it harder for new retail firms to get established, the credit crunch, and perhaps the end of the migration to the Sunbelt.  I think the credit crunch explanation holds some water (how many unsolicited credit card offers do you get each week now compared to five years ago?) but I am not impressed with the other two. 

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