Structural Fallacies
Suddenly, the U.S. jobs picture is in the economic news, and for once the news is actually pretty good. I think it helps, from time to time, to be reminded that not everybody is highly-qualified for the job market, as this video subtly suggests:
You Tube Video Link
And if you're curious about what job interviews looked like in a simpler age, this might prove educational:
You Tube Video Link
The good news? Payroll services provider ADP said Wednesday that private employers added a net total of 297,000 new jobs last month, the most in the ten years that ADP has tracked the data. Meanwhile, forecasters seem to be scrambling to raise their job gains forecasts after the Labor Department's encouraging report on a decline in applications for unemployment benefits.
On Friday, the U.S. Labor Department is expected to make headlines, reporting that the unemployment rate has fallen to 9.7%
Even so, you're likely to hear pessimistic views about job growth and unemployment; indeed, in the January 3 issue of The New Yorker, James Surowiecki says that some economists are warning that there is a long-term mismatch between the jobs that are available and the skills that workers are bringing to the job market. If people don't have the skills to work in the fields where the jobs are (so the argument goes), unemployment will continue to plague our economy. (You can find the article here: New Yorker Article.)
There are two problems with that argument, Surowiecki notes. If we were indeed suffering from "structural unemployment," then companies would be having trouble filling their skilled vacancies, have to pay their existing workers more and work them longer hours to make up for the shortage of people they can't hire. As it happens, the opposite seems to be true. Payrolls have been slashed across manufacturing, retail, wholesale, transportation and information technology sectors. The percentage of small businesses with "hard to fill" job vacancies is near a 25-year low, Surowiecki reports, and people who are lucky enough to have jobs haven't seen their work hours go up in the last year.
The second problem is that this exact same "structural unemployment" argument has been made before, and it has not always been a perfect forecaster of what happens in the future. During the 1981-82 recession, prominent economists warned that structural issues would permanently raise unemployment levels, but by 1984 unemployment was back to where it had been before the recession hit. In a 1964 survey of economists, more than half reported that structural unemployment played a significant role in limiting the number of jobs. Three years later, unemployment was below 4%. During the Great Depression, President Roosevelt thought unemployment might be stuck at a permanently high level.
The point: recessions are crises of confidence, and this lack of confidence leads us to believe that this time it's finally different, and we are in a hole we cannot possibly climb out of. If the historical evidence is to be believed (and it always seems to be a better indicator than the panic of the moment), then the jobs report on Friday will be something to celebrate, a sign that things are getting a little better, that the sun is starting to peek through the clouds, and this long hangover from the Great Recession won't go on forever.
Job reports data: Jobs Report Data Link
New Yorker analysis: New Yorker Analysis Link
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