In all respects save employment numbers, the United States economy is back to normal. Real growth in 2010 was 2.9 percent — not spectacular, but any developed nation would take that figure. The adjusted U.S. GDP just rose back above its prior peak of late 2007 — meaning U.S. economic output has never been higher than right now. Sales numbers are good across most industries, corporations are sitting on ample cash, banking and equity liquidity is fine, no primary resource is scarce and the index of Standard & Poor’s 500 earnings per share is at an all-time high.
That’s a healthy economy — except for unemployment. Job numbers have improved somewhat but are nothing to write home about. Even considering that hiring usually trails a recovery by several months, unemployment numbers are spooky. President Barack Obama just implored the U.S. Chamber of Commerce to “hire and invest”.
Let me propose an uncomfortable notion. Namely: two mainly unrelated phenomena happened at once, the recession and a job contraction. Though the former triggered the latter, they actually had little to do with each other. The job contraction would have happened regardless.
That’s why the end of the recession — and federal stimulus spending — hasn’t cured the jobs problem. And until we accept that the surge in unemployment is mostly something that would have happened even if the autumn 2008 financial-markets meltdown never occurred, we’ll continue to be puzzled about why jobs have not bounced back though growth has.
Workplace productivity has improved markedly in the last generation, and it’s led to the point where far fewer people are needed for many kinds of output. Twenty-five years ago, about 150 hours were required to manufacture an automobile. Today the average is down to about 80 hours, and it’s still declining. The car produced today is of much higher quality than the car produced then, meaning used cars last longer and don’t require replacement as often. The net is a huge decline in automotive assembly employment, while cars, as products, are the best they have ever been.