Edward P. Lazear was chairman of the President's Council of Economic Advisers from 2006-2009. Currently he, is a professor at Stanford University's Graduate School of Business and a Hoover Institution fellow.
He had a frightening piece in the May 16, 2011, on-line version of the Wall Street Journal about unemployment in the United States. He noted that American workers are worried about the economy and don’t see it as improving, in spite of employment growth averaging 200,000 jobs a month and the unemployment rate down from a peak to 9% currently.
Lazear thinks a better measure of the labor market comes from looking at "hires and separations," or, in the bureaucratic language of the Bureau of Labor Statistics, the "Job Openings and Labor Turnover Survey" or JOLTS.
In February of 2009, near the economic bottom, the job market lost more than 700,000 jobs in a month where employers hired four million workers. In March of 2011, employers again fired four million workers – the same number of hires.
"We added jobs because hires exceeded separations, not because hiring increased," Lazear tells us. There were 4.7 million people separated from their jobs in February of 2009 but only 3.8 separations in March of 2011. Layoffs went down from 2.5 million in Feburary of 2009 to 1.6 million in March of 2011.
Lazear warns us not to be too cheered by the reduction of layoffs. Layoffs occur early in a recession and the
slowing of layoffs is not necessarily a harbinger of recovery. That hires exceed separations is not necessarily indicative of a healthy labor market.
The reason is that jobs "churn." At the bottom of the current recession, 3.6 million workers were hired in a month. Even in 2009, a terrible year, 45 million people were hired. There are over 150 million workers or job seekers. About one third of jobs turn over in a typical year. The labor market "creates" 200,000 jobs because 5 million were hired and 4.8 million were separated from work, "not because there were 200,000 hires and no job losses."
Back in 2006 and 2007, American firms were hiring about 5.5 million workers each month – and the current number is only 4 million. Lazear states that a recovery-level pace of hiring is "at least half a million more hires per month than we are seeing now." He notes:
The combination of low hiring and a large stock of unemployed workers, now 13.7 million, means that the competition for jobs is fierce. Because there are now many more unemployed workers, and because hiring is only about 70% of 2006 levels, a worker is about one-third as likely to find a job today as he or she was in 2006. It is no wonder that workers do not feel that the labor market has recovered.
This robust situation hardly describes the current job market. Lazear recommends low taxes, avoiding weighty regulation, and open markets in the USA and abroad. A clime where investment is profitable, productivity increases and employers make more money when they are hiring more workers is desired to create a strong labor market.
The entire article is at:
http://online.wsj.com/article/SB10001424052748703730804576317142210698436.html
He had a frightening piece in the May 16, 2011, on-line version of the Wall Street Journal about unemployment in the United States. He noted that American workers are worried about the economy and don’t see it as improving, in spite of employment growth averaging 200,000 jobs a month and the unemployment rate down from a peak to 9% currently.
Lazear thinks a better measure of the labor market comes from looking at "hires and separations," or, in the bureaucratic language of the Bureau of Labor Statistics, the "Job Openings and Labor Turnover Survey" or JOLTS.
In February of 2009, near the economic bottom, the job market lost more than 700,000 jobs in a month where employers hired four million workers. In March of 2011, employers again fired four million workers – the same number of hires.
"We added jobs because hires exceeded separations, not because hiring increased," Lazear tells us. There were 4.7 million people separated from their jobs in February of 2009 but only 3.8 separations in March of 2011. Layoffs went down from 2.5 million in Feburary of 2009 to 1.6 million in March of 2011.
Lazear warns us not to be too cheered by the reduction of layoffs. Layoffs occur early in a recession and the
slowing of layoffs is not necessarily a harbinger of recovery. That hires exceed separations is not necessarily indicative of a healthy labor market.
The reason is that jobs "churn." At the bottom of the current recession, 3.6 million workers were hired in a month. Even in 2009, a terrible year, 45 million people were hired. There are over 150 million workers or job seekers. About one third of jobs turn over in a typical year. The labor market "creates" 200,000 jobs because 5 million were hired and 4.8 million were separated from work, "not because there were 200,000 hires and no job losses."
Back in 2006 and 2007, American firms were hiring about 5.5 million workers each month – and the current number is only 4 million. Lazear states that a recovery-level pace of hiring is "at least half a million more hires per month than we are seeing now." He notes:
This robust situation hardly describes the current job market. Lazear recommends low taxes, avoiding weighty regulation, and open markets in the USA and abroad. A clime where investment is profitable, productivity increases and employers make more money when they are hiring more workers is desired to create a strong labor market.
The entire article is at:
http://online.wsj.com/article/SB10001424052748703730804576317142210698436.html
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