Monday, July 11, 2011

On joblessness persistence

Monthly nonfarm job openings, seasonally adjusted

The Kauffman Foundation has a new empirical study on job creation (h/t Tyler Cowen) which helps explain the slow recovery in employment:

The Great Recession of 2007-2009 may be distracting attention from a more fundamental troubling economic trend. The United States appears to be suffering from a long-term leak in job creation that pre-dates the recession and has the potential to persist for an unknown time. The heart of the problem is a pullback by newly created businesses, the economy's most critical source of job creation, which are generating substantially fewer jobs than one would expect based on past experience. . . . 
At a time when policymakers are focused on finding solutions to sluggish employment growth, the role of young firms and establishments on broader employment growth is poorly understood and appreciated. Two implicit assumptions in the debate about jobs, which we believe are wrong, deserve mention. 
First, policymakers’ focus on big changes in employment because of events such as a new manufacturing plant or the recruitment of a business to a community ignore the more important fact that our jobs outlook will be driven more by the collective decisions of the millions of young and small businesses whose changing employment patterns are not as easy to see or influence. 
Second, it is just as easy to be deluded into thinking that the jobs problem will be solved by growth in the number of the self-employed. . . . 
The clear challenge for the U.S. economy instead is to start more employer businesses, ensure that they are starting larger, and nurture their growth.

Those visits to new plants are the bread and butter of political theatrics. In any case, the (probably accurate) notion that "changing employment patterns are not... easy to see or influence" fails to give politicians and candidates something to promise. Don't expect any 2012 contenders to suggest that there is almost nothing we can do about the employment situation.

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