Our Labor Market Malaise

Photo: soukup

A lot of us were disappointed in the latest jobs report. Non-farm payrolls grew by only 54,000. By contrast, a good recovery requires growth of several hundred thousand jobs a month. But my dinner table conversations with Betsey helped me put it in perspective. (And yes, given her current job, this explains the somewhat political nature of this post.) Her comparison:  Through the entire eight years of the (Dubya) Bush administration, non-farm payrolls grew by an average of only 11,000 per month. OK, the Great Recession explains some of this. But not a lot. Let’s cherry-pick the most favorable sample we can, focusing on the period through to the absolute peak in employment, which occurred in January 2008. This still yields average jobs growth of only 66,000.

The point of this comparison isn’t to argue that the economy is doing well.  It isn’t. A healthy labor market adds hundreds of thousands of jobs per month, as it did under Clinton (average: +237,000); Reagan (+168,000); and Carter (+215,000), although it was also notably weak under the earlier President Bush (+54,000).

My point is that the current malaise goes back a lot longer than the current recession. Yes, the recession that began in 2007 has been a disaster. But we also produced too few jobs from 2000-2007.  Recall that this is the period in which Washington was focused on tax cuts for the rich.

UPDATE: In the comments Randall Hoven is correct to remind me that sometimes a picture is worth a thousand words.  Here’s the history of non-farm payrolls: a long upward march through time, which flattens out only over the last decade.


Randall Hoven

Rather than selectively cherry-pick the dates you used to attribute job growth to presidents, why not just show us the graph? Here it is: http://research.stlouisfed.org/fred2/series/PAYEMS?cid=32305

The graph shows that job growth was a virtual straight line from about 1965 to 2000. There were wiggles in that period, but with no discernible pattern related to presidential terms. Job growth started to sputter around 2000 to 2003, but looked almost normal from 2003 to the end of 2007. Only since 2007 has job growth not only halted, but seriously declined. It is not clear that we will ever reach that 2007 peak again.

Chris S

And yet - even that graph is going to be misleading.

Fortunately, FRED is fantastic. Here is the graph for PAYEMS / POPTHM to give you the idea of non-farm as a fraction of the population -- http://research.stlouisfed.org/fredgraph.png?g=TC (hope that works). POPTHM only goes back to 1959, so this graph is limited in that way.

Looked at this way, the peak was back in 2000, and you (me=.ca) have dropped through job levels of the early 90's back to levels not seen since you passed them on the way up in the mid-80's.

Maybe the reason it seems so bad is because it is.


You ignore the fact the dollar was devalued and government spending dramatically increased during the Bush years and the increase in spending was largely domestic. Bush even had his own "stimulus packages". Your "eat the rich" philosophy is more or less anti-Semitic economics. Replace the word "rich" with the word Jew, and I think you will figure out why you need a better understanding of economics.

Bruce Koppenhoefer

Excellent point. In general, our economic history (data from census bureau site) over the past several decades indicates that stimulus spending works better (greater, more consistent job growth) than tax cuts.

Fred H

Either you have that exactl backward, or I missed all those great stimulus spending programs of the '60s, '70s, '80s, and '90s - a period which featured several significant tax cuts and one significant tax increase, but no major stimulus programs other than a few tax "rebates" (aka temporary tax cuts).


I expect better of an economist than to simply associate job numbers with presidential terms and then spout a left-wing talking point.

Wolfers is perpetuating the popular notion that if only presidents can pull levers and push buttons in the right combination the economy will run at full steam. There are enormously strong global and societal trends at play far beyond any president's control.


Mike MacDonald

Politics and the spouting of talking points is the essence of Economics. The past five years has revealed Economics as a sham. The comet smote the economies of the earth and not only did the Astrologers not see it coming, they can't explain what it meant.

The universities of the world should simply subsume Economics into their Political Science departments. It sounds more appropriate.

Marcus Kalka

Yours is an interesting point and I can see where you're coming from, but "comets" have been "smiting" various disciplines over the centuries. It's happened with philosophy, religion, physics, et. al. Just because Aristotelian physics was wrong doesn't mean that we should ignore all of Aristotle and burn his books and ban any classes on ancient philosophy. This is all part of the evolution of human civilizations; our economic traditions [even if one believes they are wrong] are part of our history. Academic disciplines are susceptible to failures, but this doesn't mean that the disciplines should be done away with altogether. A collapsing bridge should not mark the shutting-down of a university's entire engineering program. A poorly built building should not signal the shutting-down of a university's architectural program. The discovery that the sun was the center of the solar system did not mark the end of astronomy, but rather the beginning of a new era in astronomy. Economics functions in the same way. We can learn from our mistakes; this is what growing up's all about.


Mike MacDonald

With all due respect, sir, I do not render a third of my income to Caesar in the name of Engineering or Architecture. The wheelwright and hut-builder don't need that much cash. In addition, there are no Basel accords that warrant that when buildings collapse or cars crash, they must all do so.

I will grant you the analogy to religion, however. Perhaps it is the Divinity departments that should inherit Economics.

Here's a hint: don't model living meat with mathmetics. Call it "MacDonald's law".


One angle to consider is many brick-n-mortar firms ramped up investment in technology during the 1990s which brought about significant increases in productivity.

Eric M. Jones

This is job-growth per month. Compare this to population-growth per month.

I do wonder if all this economic craziness in simply the baby-boomers large pig passing through the demographic python's gut. It explains a lot.

Marcus Kalka

Interesting analysis, Mr. Wolfers. This labor market situation is quickly transforming from an economic/political issue into a full-blown cultural issue. The issues surrounding the job situation in the US are quickly evolving into an all-out "Kulturkampf" with questions of education, skills-training, student loans, the prospect of retirement, and generational gaps in technology & culture being thrown into the mix. These are pertinent questions that have not yet been fully addressed. Despite the flurry of factors affecting the labor market, I believe the answer to the jobs conundrum is much simpler than it seems. It comes down to production, productivity, and maintaining a productive workforce. A free market is one that fosters such production. Production is the key to wealth -- not over-consumption, not overtaxing. By way of the employment numbers, I think the economy is telling us something. It's telling us something about our economy, our way of life, the way we do business, the way we train people, the way our markets work, and our culture. Thus, something in me believes the issues surrounding our current labor quagmire are as much connected to our culture as to our politics and our economy.



It would be interesting to graph job growth in relation to other factors, say averge tax rate or per-capita government spending.

Also, it seems that there are still many jobs going unfilled because employers can't find candidates with the needed skills. It'd be interesting to see how that's changed over time.


www.FairTax.org The Fair Tax would solve many of our economic problems, If not all of them. www.FairTax.org

Joel Upchurch

But does this chart allow for drop in fertility rates in the seventies which means that by 2000 there were were a lot less people entering the job market? There simply weren't enough warm bodies to sustain the job growth rates of previous decades.



Why should we take seriously an analysis of average job creation over the past ten years that ignores the events of September 11, 2001? Fail.

Peter McCorison

if production is constant and labor efficiency goes up, then employment must go down, no matter how many fancy normalizations are applied.

Steven Schmitt

Wasn't the unemployment rate during the period from 2000 through '07 or '08 in the very low single digits? How can the slowing of job growth be a problem if pretty much everyone who wanted a job had one (including illegal immigrants)? Especially in an era of rising productivity? Could it be that the anemic job growth is meaningless as a metric?

I'm not an economist, therefore I am confused.


"number of jobs" is like "RBI" in baseball, that is to say, not a useful metric by itself (or maybe at all), but the press harps on it anyway.