Two relevant articles cited below, with excerpts. ***
The Economy Gets Back on Track but Once Again Leaves Many Workers Behind By Kevin L. Kliesen http://www.stlouisfed.org/publications/re/2004/a/pages/econ_track.html# Excerpt: Is the United States Deindustrializing? Another reason some analysts cite to explain the current jobless recovery is the alleged deindustrialization of the United States through international trade. This includes the movement of production facilities to countries where labor costs are lower, such as China, and the closure of firms in the United States because their goods or services ostensibly cannot compete with lower-priced imports. A quick look at the data suggests that the number of job losses arising from these trade effects is a very small percentage of total unemployment. According to the Bureau of Labor Statistics. report Extended Mass Layoffs, the number of layoffs occurring from "overseas relocation" and "import competition" increased from 18,100 in 1996 to 32,400 in 1999.10 These layoffs then declined modestly in 2000, before rising to 43,700 in 2001. Although the rate of so-called trade-related layoffs moderated in 2002 (falling to about 32,500), the pace has quickened somewhat in 2003; layoffs totaled a little more than 19,800 through the first two quarters (an annual rate of about 40,000). Still, at their peak in 2001, trade-related layoffs represented only 0.6 percent of total unemployment. Indeed, in congressional testimony in October 2003, Douglas Holtz-Eakin, director of the Congressional Budget Office, argued that "only about 90,000" lost jobs in the manufacturing sector from 1998 to 2002 could be attributed directly to the import of goods from China. A More-Productive Workforce When demand grows at a slower than normal pace, firms are reluctant to hire new workers to boost production; instead, the firms prefer to meet existing product demand out of inventories (which helps explain why inventory investment was much weaker than usual in the past two recoveries) or by making their employees more productive. In the current recovery, firms have been able to get more out of their existing workforce because they are still reaping the gains from the surge in capital investment in the late 1990s and into early 2000, which, combined with the aforementioned technological improvements, significantly improved the productivity of their workforce. As seen in Table 1, output per hour (labor productivity) in the nonfarm business sector increased by 6.7 percent in the 2001-03 recovery, faster than the 1991-92 recovery and the post-war average. However, the growth of output per hour in the current recovery is all the more impressive given that labor productivity growth remained rapid through the recession. During recessions, output per hour tends to fall (growth turns negative) as real GDP declines by more than employment or hours worked. In the seven post-war recoveries prior to the 1991-92 episode, gains in labor productivity and hours worked contributed about equally to the gain in economic growth (nonfarm business output). But in the past two recoveries, hours worked has declined, meaning that all of the gain in output has stemmed from labor productivity growth. Hence, the recent rapid productivity growth has obviated the need for firms to expand their payrolls to the extent they usually do during an economic recovery.11 Eventually, though, higher productivity growth means higher income, higher spending and increased employment. In short, this is why we see real GDP continuing to increase while labor input (hours and employment) has not. *** Has Structural Change Contributed to a Jobless Recovery? August 2003 Volume 9, Number 8 Authors: Erica L. Groshen and Simon Potter http://www.newyorkfed.org/research/current_issues/ci9-8/ci9-8.html Excerpt: CONCLUSION The period after the 2001 recession will be remembered as the second jobless recovery. Our inquiry into the reasons for the current labor market slump suggests that structural change has played an important role. Industries that lost jobs during the recession have continued to shrink during the recovery, and permanent job losses have eclipsed temporary layoffs. The largely permanent nature of this recession's job losses could explain why jobs have been so slow to materialize. An unusually high share of unemployed workers must now find new positions in different firms or industries. The task of finding such jobs, difficult and time-consuming under the best of conditions, is likely to be even more complicated now, when financial market weakness and economic uncertainty prevail. In such an environment, firms may hesitate to create new jobs because of the risks involved in expanding their businesses or undertaking new ventures. Some support for this interpretation comes from the findings of the Job Openings and Labor Turnover Survey, which suggest that the current shortfall in payroll growth owes more to low job creation than to widespread job elimination. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
