More Workers Need to Join the Labor Force to Keep the Economy Growing
Date Posted: February 26, 2020
Posted In: Workforce,
From The Hill: Inertia is a very important process. Inertia, like love, makes the world go round, and keeps it going around. Bodies in motion tend to stay in motion. Economies that are growing tend to continue growing. So turning to the January employment situation report reminds us that the economy has inertia on its side. It has a reasonable head of steam. Growth is not the wow factor. The economy is growing at about 2 percent a year, which is pretty pedestrian by historical standards. Instead it is about the potential of the economy. The reason why potential growth is low today relates to the reason why recent jobs reports have been raising some eyebrows.
When an economy is growing, economists always look for the irresistible object, for whatever it is that will stop the forward motion of the economy, and make an economy that is newly at rest tend to stay at rest. This is not because economists love misery. It is only because the emergence of an obstacle to a growing economy gives us our next job to try to perpetuate growth or, if that obstacle in fact stalls the economy, to restore growth.
The economy has been creating a lot of jobs month after month, which is surprising because the working age population has been growing very slowly. Americans are greying, Baby Boomers are retiring, and there are proportionately fewer teens and young millennials to take their places in the labor force. As the number of jobs grows at an impressive pace month after month, economists are scratching their heads and wondering, where are all of these people coming from? In looking for roadblock that could stop the jobs bandwagon, and potentially the economic expansion, when will those critical people stop showing up in the monthly jobs report?
The January jobs report provides the answer, at least for one more month, which is not just yet. The economy added 225,000 more nonfarm payroll jobs. Expansion continues, even though the labor force participation rate is barely changed, and the trend dictates that the ceiling on labor force growth is close overhead. Worrywart economists looking might see a few small clouds on the otherwise bright horizon. Manufacturing employment continues to look flat, despite all the efforts to expand exports and add good blue collar jobs. Long term unemployment did not decrease much.