Modern labor economists see employment and unemployment as a search and matching process with a lot of churn. The popular impression, echoed in most media discussion, is that there is a fixed number of jobs, and people just wait around for more jobs to be "created." That's what it may feel like to an individual, but that's not how the economy works. Lazear's column puts in one very short space some of the better ways to think about unemployment.
The central fact of labor markets is huge churn, not a fixed number of lifelong jobs:
During the typical month when jobs increase by about 100,000, 5.1 million workers are hired and five million separate from their jobs, resulting in a net change of +100,000 jobs.
During the worst month of the most recent recession (June 2009), when net jobs decreased by almost half a million, there were still 3.6 million hires.
The labor market is dynamic; even through sluggish periods, there is tremendous churn.Recessions are not what you think:
One might expect that hires would fall and separations would rise in recessions.
Not so. There are lots of hires in booms but also a large number of separations; and in recessions there are lower levels of both hiring and separations...
Workers quit to move to better jobs when the labor market is strong.
...as was typical in this and previous recessions, separations declined along with hiring. Because hires are so large and variable, net job creation depends in large part on what happens to hires.
There's also an excellent graph on Calculated Risk which makes the same point very well, and which I wrote up here http://economicsnz.blogspot.co.nz/2014/08/a-brilliant-graph.html
ReplyDeleteI like the info too...but it still comes back to the need for good economic growth, job creation...the bigger question is can a sustained period of robust growth raise labor force participation rates? Can SSDI and VA "disability" programs shrink?
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