The job numbers you really need to know
By Paul Kaihla, Business 2.0 Magazine senior writer, August 22 2006
“The big news is the drop [in job creation] since the expansion of the 1990s,” says Scott Schuh, a senior economist and policy advisor at the Federal Reserve Bank of Boston. “Fundamental job creation has not really come back, and that’s a puzzle.”
Job creation hasn’t rebounded to its late-’90s peak, but the reported employment numbers still look okay. Why? Simply put, for the past few years, the economy hasn’t been destroying as many jobs, and there’s been a mild rebound in job creation. That adds up to reports of net job gains.
But that modest increase in job creation is more of a blip in an otherwise long-term slide, economic experts say.
One could argue that the data suggests jobs are becoming more stable in the U.S., says Jonathan Leonard, an economist at the University of California at Berkeley’s Haas School of Business. “When you have jobs that come and go quickly, you get very high creation and destruction rates,” says Leonard. “But there now seems to be less churn in the labor market.”
However, lower job creation is fundamentally a bearish signal of the U.S. economy’s health and international competitiveness. “A recovery that doesn’t generate as many jobs as last time around is troubling,” adds Leonard.
My own guess is that the decline in job creation will continue as bosses at big companies use fears of offshoring and mass layoffs to impose more and more work on existing staff. Memories of over-hiring and subsequent layoffs during the bursting of the bubble are still too fresh.