Why Jobs Haven't Come Back - Weak Demand Is the Problem

NY Times ^ | January 17, 2011 | Laura Tyson

[neverdem]

Will high unemployment remain a constant feature of the new economy?

So far the pace of recovery from the 2008-2009 recession, the deepest since the Great Depression, has been agonizingly slow, barely enough to absorb the monthly growth in the labor force and not nearly enough of offset the job losses that have occurred. Weak demand rather than structural changes in the composition of output or a mismatch between worker skills and jobs is the primary cause of continued high unemployment.

Even if demand strengthens enough to create 300,000 jobs per month, three times the average monthly rate in 2010, employment will not regain its pre-recession level until 2015 at the earliest. And this is very optimistic.

Consumption and construction are usually engines of strong recoveries, and both remain troubled. Households are still rebuilding their balance sheets and reeling from losses in wealth, and foreclosures and unsold property are impeding a rebound in construction. Small and medium-sized businesses that usually account for most new jobs still face weak, uncertain demand and credit constraints.

Even if demand strengthens significantly in the next few years, job growth is likely to lag output growth even more than it has during the last two “jobless” recoveries. Continuing a 20-year trend of polarization in the labor market, employment losses in the 2008-2009 recession were more severe in middle-skill white and blue collar jobs than in either high-skill, white-collar jobs or low-skill service occupations.

Strong productivity gains driven by labor-saving technological and organizational changes mean that many of the lost middle-skill jobs are gone for good. Many of the displaced workers, especially those unemployed for long periods of time, do not have the training and experience required for new high-skill jobs. Nor will new entrants to the labor force with just a high-school education...

[neverdem]

Laura Tyson is the S.K. and Angela Chan Professor at the Haas School of Business at University of California, Berkeley. She was the chair of the Council of Economic Advisers and the National Economic Council in the Clinton administration and she is a member of President Obama’s Economic Recovery Advisory Board.

This rat has just made a pretty good economic argument against illegal aliens and amnesty, IMHO.

[MontaniSemperLiberi]

Note how she conflates industrial, commercial and institutional construction with residential construction. No one is building anything, let alone houses.

[Jvette]

Nothing proves the laws of supply and demand better than this current unemployment situation.

There is great supply and little demand.

Read a newspaper column bemoaning the fact that employers have a plethora of applicants and do not have to offer excessive perks and higher pay to find very qualified people to fill the open jobs.

Who’d a thunk?

[NoLibZone]

4 dollar gas and the coming 5 dollar gas will weaken demand.

[Brilliant]

Well that’s sort of begging the question. The real reason is that regulations have destroyed the profitability of American companies.

[Blood of Tyrants]

Weak demand is why Obastard’s plan of giving a $3000 tax credit to employers who hire someone who has been laid off for an extended period had no chance of working. Why hire someone when you have no work for them?

[proxy_user]

There were still about 400,000-500,000 housing starts in 2010. Presumably, they are building houses in places where there is not a lot available.

[samadams2000]

People taxed to their asses with or without jobs stifles demand. You dont need a Phd to understand.

[fight_truth_decay]

Households are still rebuilding their balance sheets and reeling from losses in wealth, and foreclosures and unsold property are impeding a rebound in construction.

Those families with safe investments recovered a year ago--growth is steady... aso those who had sound well managed diversifed investments recovered.

Foreclosures are not as plentiful in my area as was not overbuilt and builders, subcontractors are booked for months ahead. The homes I knew about that went into foreclosure had families that were walking a tight rope beforehand--divorces, just walking away etc. The homes being built now are of more upscale in the marketplace and not speculative. If you piced up a For Sale brochure, you would never say--wow that place is really inexpensive!!

Property I have eyed when listed, sold within a short period of time as was on precious property and priced reasonably and was not forced situations. Location and pricing was key. One family I know had their property on the market several years ago and could not sell--this time sold within the month to a new arrival into the state. They in turn bought two properties, one local and the other retirement in Florida (a deal). We did not ever have massive building of sub divisions, as a "vacationland" NE state where year round outdoor activities are part of the package. Second homes etc are located here. Also with a new Republican governor who with a strong business background, mayor of a city that brought growth to the city as well--gave us the first Republican governor in over 40 years. And I might add he was homeless and on his own at 11 leaving an abusive family behind. Won spending about $160,000. The only negative has been the federal government deciding to spread ship building contracts and like subcontracting around to other states where they are now behind in orders and cost over runs when before delivery was on time and no cost over runs (BIW General Dynamics). But the federal government wanted to spread their wealth--unions had some input, of course.

[JoeFromSidney]

Tyson is another Keynesian, and this is just more Keynesian claptrap. Creating money out of thin air, in the hope of "stimulating" demand failed in the US in the 1930s, and in Japan in the 1990s.

However, it's not a new fallacy. William Jennings Bryan's famous "Cross of Gold" speech was a call for inflation as a means of "stimulating" the economy.

[grey_whiskers]

Strong productivity gains driven by labor-saving technological and organizational changes mean that many of the lost middle-skill jobs are gone for good.

Not to mention the flight of many factories to Mexico (NAFTA) and thence to the Far East (Mexico implodes, leading many to leave for under-the-table work in the US).

Many of the displaced workers, especially those unemployed for long periods of time, do not have the training and experience required for new high-skill jobs.

And with a large share of the factory jobs in Asia, what are the factory workers going to live on? Permanent unemployment? Hmm, can you say "lower demand" and "higher government costs"?

And speaking of "higher government costs" can you say "Illegal Central American immigrants going to the emergency room for primary care?"

As far as training and experience? I remember when companies PAID for the training they wanted their employees to have. Not to mention the unspeakable greed of Bill Gates etc. in pursuing H1-Bs and offshoring for tech work (Microsoft was once sitting on $50 billion in cash: invested in T-bills it would have thrown off $1 billion /yr "risk free" without affecting the principal or the cash flow from continuing operations. But no, they had to go with Brian Valentine's "Think India! Two for the price of one!" bullsh*t.)

NO cheers, unfortunately.

[goodnesswins]

YEP...I know a guy who worked for Microsoft and trained his replacements (East Indians)...but, he’s still a big LIB

[Bedford Forrest]

Is this the same Laura D’Andrea Tyson who used to be so enamored of top down, command economies [as in the case of her favorite commie thug regime, Romania under Nicolae Ceausescu]? In her scissors and paste job for the NY Slimes the little tyrant wannabe never mentions confiscatory taxes, insane over-regulation and ObungaCare as the primary causes of the present mess. Hasn’t learned a thing since her hero Nicky had that rough day at the office back in 1989 or so.

[RKBA Democrat]

Naaah. It’s because those who generate the private sector jobs are sick of being punished for being entrepreneurs.

[smokingfrog]

The Employer Mandate

ObamaCare’s employer mandate is among the new laws most anti-growth provisions. When implemented, it will force most American business firms to offer government-approved health insurance to their employees or else pay new federal taxes for not doing so. This costly new requirement will make it more expensive for firms to hire workers in the future. Consequently, it will destroy jobs, and many firms are likely to slow down on hiring in anticipation of its implementation.

ObamaCare’s employer mandate will discourage business development and growth. Small firms with 50 or fewer workers will have very strong disincentives to expand. These businesses can avoid the new penalties by staying small; growth will simply add new costs and burdens. Many businesses with low profit margins are unable to pay the substantial cost of providing comprehensive insurance to all of their employees or the new taxes under ObamaCare’s employer mandate.

[G Larry]

Obama has added Trillions in new debt, Obamacare, and is proposing hundreds of new regulations, outside his Constitutional authority. These regulations and associated debt create financial risk and uncertainty that make prudent business planning impossible.
In the face of this uncertainty, business WILL NOT expand!
When Obama challenges companies to spend their idle cash, the execs should respond, “We would, if we could be certain how much of it you plan to steal”.

[Frantzie]

Why Jobs Haven’t Come Back? One word.

Obama.

Most smarter business owners know he is Mugabe.

The morons in America just watch TV and get brainwashed.

[mo]

how..”UNEXPECTED”....

Until we are de-regulated and de-taxed...America is closed for business.

The Federal burocracy...the regulatory class is strangling the country.

[MCF]

I read this women’s bio in Wikipedia. She has spent most of her life in school in one way or another. She is considered an expert on business and yet she has never been directly involved in running one. She is a perfect example of what is wrong with the Intelligentsia. Elitists making pronouncements about something they have never been directly involved with. But then again maybe she stayed at the Holiday Inn.

[Moonman62]

There is great supply and little demand.

Let's look at a great example of success in recent times. Apple has a created a great deal of supply that didn't exist ten years ago. Demand has followed supply and created a great number of jobs. (Without any government subsidies I might add.)

Compare what Apple's done with all the demand side stimulus by the government, which has had the net effect of creating a huge amount of debt and a 10% unemployment rate.