Great American Jobs Machine Is Conking Out
Like lava flowing from a volcano, creative destruction—the economic notion that old companies and industries have to be wiped out before new ones can be born, first popularized by economist Joseph Schumpeter—is scary but beautiful.
In the New Economy of the late 1990s, this phenomenon turned the U.S. into an amazing job-generating machine, because the rapid destruction of companies and jobs in flagging industries was outpaced by even more rapid creation of new jobs in growing sectors. From the bottom of the 1991 recession through the economy’s peak in early 2001, the U.S. created 24 million jobs.
That creative/destructive energy, triggered by rapid technological change and globalization, is long gone. From the end of the 2001 recession through December, 2007, the U.S. economy added just 7 million jobs. Even taking into account that this expansion has been shorter than the 1990s one, the growth rate of jobs was about half as fast this decade.
Now, what little energy the jobs machine had left may finally have run out. On Feb. 1 the government reported that U.S. employment shrank by 17,000 jobs in January, the first time employment declined for a month since August, 2003. The weak report helped convince some wavering economists that the U.S. is entering a recession, which would mean further job losses in the months ahead.
On its face, the January jobs report isn’t dire. The net loss, while it made headlines, was just 17,000, which is so close to zero that it’s statistically indistinguishable from no change. What’s more of a concern, though, is evidence in the report that 2000’s pattern of pokiness is continuing.
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Photo by MSDesigns.
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