“the third quarter of 1951, during the Korean War, GDP grew at an 8.34% annual rate yet employment fell by 0.23%. That was the only instance in recorded history. (Quarterly GDP data began in 1947, the Current Employment Statistics data begins in 1939). (emphasis added).
To be fair (to Harry Truman), the economy was growing at a 5.2% rate for the entire previous year (versus Bush at 3.4%). In addition, even though employment growth was negative for the quarter, in September 1951 employment had grown 3.2% over the previous 12 months. Today, employment growth has fallen 0.3% the past 12 months.
Still curious, I went back and examined if GDP had ever grown 5% over any 12 month period while employment had fallen (annual GDP data goes back to 1929). Nothing. I lowered the GDP parameter to 4%: still nothing. How about 3%? Finally something. In the first quarter 1950, GDP had grown 3.9% over the past 12 months yet employment had fallen 0.6% over the same period.
Mind you, this was right after the post-WWII recession, and quarterly GDP had just put up a 17.6% growth rate for the first quarter, enough to push GDP positive while employment lagged. In the second quarter of 1950, GDP grew at a 12.6% annual rate and employment increased at a 12% annual rate. Now that was a recovery.”
The paradigm shift (apologies for using that awful cliche) comes from the new productivity paradox, discussed in this space back in June. “In a normal economy, GDP growth creates jobs as business needs more labor to expand production. Today, that doesn’t seem to be the case, and this has never happened in recorded economic history.”
Food for thought . . .