Three of my colleagues and friends at the University of Chicago -- Kerwin Charles, Erik Hurst, and Matt Notowidigdo -- recently presented some new research that aims to understand the ups and downs in the U.S. labor market. It’s more serious and important than the usual stuff we deal with on the blog, but every once in a while we deviate from trivialities when something really good comes along.
They’ve been kind enough to put together a layperson’s version of the research below. For those looking for the full-blown academic version, you can find that here.
A Structural Explanation for the Weak Labor Market
By Kerwin Charles, Erik Hurst, and Matt Notowidigdo
In the aftermath of the Great Recession, the labor market has remained anemic. Between 2007 and 2010, the employment-to-population ratio of men between the ages of 21 and 55 with less than a four-year degree fell from 82.8 percent to 73.8 percent. As of mid-2012, the employment-to-population ratio for these men remained depressed at 75.6 percent.
In our new working paper (abstract; full PDF), we show that the recent sluggish labor market in the U.S. - particularly for prime age workers without a college degree - can be traced back to the large sectoral decline in manufacturing employment that occurred during the 2000s. After decades of relative stability, total manufacturing employment in the U.S. fell by 3.5 million jobs between the beginning of 2000 and the end of 2007 (see chart below). These manufacturing jobs were lost even before the Great Recession started. During the recent recession, another 2 million manufacturing jobs were lost. While there is talk of a recent manufacturing rebound in the U.S., the recent increase is only a tiny fraction of the total manufacturing jobs lost during the 2000s.