The Great Recession appears to have solidified trends that took hold in the early 2000s. During the 1990s, 16 percent of total private-sector employment per quarter was typically accounted for by job churn—expanding companies’ hiring new workers and shrinking ones’ handing out pink slips. Since the turn of the century, the rates of new hirings and of separations have slowed. The quarterly churn rate was closer to 12 percent in 2012, the latest data available. In raw numbers, some 14 million jobs are churned per quarter; it would have been 18 million at 1990s rates. The U.S. economy is not reallocating labor resources to the places where they will be most productive as quickly as it did.
Job reallocation is “one of the primary ways an economy expands,” Mark Curtis, a visiting scholar at the Atlanta Fed says. The link with economic and wage growth is particularly important for younger workers. With a few exceptions, Curtis sees the decline in job reallocation across all states and industries. And he is not alone in find that troubling, though no economist has conclusively identified the cause of this decline.
America’s iconic companies that disappeared
The second piece of evidence for America’s losing its jobs mojo, slower productivity growth, may be temporary, and reverse with the return of normal economic growth or another burst of technological innovation. The third piece, slower new-business formation, is more concerning. It took a big hit during the Great Recession and has not regained its vigor, as it did after previous recessions. Further, the businesses that are starting up are creating fewer jobs on average than history suggests they should. That is even true in high tech and IT, where young firms had been above-average job generators.
As Birch noted, most new businesses stay small. Only a fraction become gazelles. America’s economic dynamism requires a continual flow of new ones each year. The smaller the pool of new companies, the fewer gazelles—the Apples, Amazons, Googles and Facebooks of tomorrow—are likely to emerge.
Chosen excerpts by Job Market Monitor. Read the whole story at How the Great Recession put tomorrow’s new jobs at risk.
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- The American Job Gap
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- Wages Growth in US since the Great Recession – Maps