Here’s my most recent commentary. Its kinda big, so an excerpt is here, and the full piece is below.
“Slow Job Growth Puzzles Economists.”
That was the headline of a WSJ article in March of this year, on the economy’s anemic job creation. “Many economists admit they are ‘stumped’ by the question of why the expanding U.S. economy isn’t churning out lots of new jobs, as it did so faithfully in the 1990s,” the Journal noted.
Since then, their forecasting record has gone from bad to worse. With the June shortfall now clearly not a “one-off” courtesy of July’s disappointment, one question remains: Why have so many Economists gotten it so wrong? Observers are hard pressed to recall the last time the Dismal Scientists have been so consistently inaccurate, by such a large margin, and for so long a period.
It is easy to surmise that a combination of factors is to blame for the unusually slow job growth: Productivity enhancements have delayed the need for new hires in many businesses. And, during this expansion, jobs have been outsourced overseas (which, for obvious reasons, do not show up in the Bureau of Labor Statistic’s data). Last, we cannot underestimate the impact the tech/telecom/internet crash had on suppressing end demand. So much excess capacity was created by over-investment during the bubble era, that an extended delay in job creation – “Slack in the labor market,” as Chairman Greenspan likes to call it – is the natural result.
Yet all these issues have been well known and documented long before Economists started serving up their stink bombs. Did the entire profession suddenly become unhinged – or is some other, unknown factor at work? Since most economists I know are only mildly delusional (at least, they appear that way to a non-economist) we should consider another possibility: A major factor –unaccounted for by mainstream economists — has contributed to the present recovery cycle’s unprecedented long delay in job creation.
Pick your flavor:
Word Doc: Download Economists vs. Job Creation.doc
Adobe PDF: Download Economists vs. Job Creations.pdf