The economy makes do with five million fewer jobs

Marilyn Haynes works on production at Ford Motor Company's Van Dyke Transmission Plant Aug. 2, 2012 in Sterling Heights, Mich. The nation's output of goods and services is back to the level it was before the recession began in 2007. But five million fewer people are working. Who got left out of the economy?

Tess Vigeland: Some rare cheerful-ish news today on the "Employment Situation" front. That's Bureau of Labor Statistics code for the job market. The economy added 163,000 jobs in July across the board, from manufacturing to hospitality, teachers and temps. The unemployment rate did tick up, from 8.2 to 8.3 percent.

So we note at this point that jobs are being created and the economy is churning out more things than it did in the mid-2000s. And yet, the workforce has shrunk significantly since the onset of the Great Recession. What gives? Here's Marketplace's Mitchell Hartman.


Mitchell Hartman: We are now back to producing about the same amount of goods and services we did before the recession. Slightly more, actually -- airplanes and happy meals and Xbox games.

But we have five million fewer Americans making and serving up all that stuff.

Nigel Gault: Towards the end of the recession, productivity started to grow very, very fast. And then in the early part of the recovery, it did extremely well.

That’s Nigel Gault, chief U.S. economist at IHS Global Insight. So, I asked him: did we simply weed out the workers we didn’t need, the most unproductive ones who just pushed papers and buttons without adding value?

Gault: No I’m not sure that’s quite a fair way to characterize it. I mean, I would say we’ve managed to get more productivity from the workers that we have, so that clearly we don’t need as many as we used to.

And he says chalk that up to new technology -- robotic arms that work the assembly line and software programs that crunch data without as many humans involved. 

Now, this is pretty much standard operating procedure for the economy -- has been for decades. Jobs eliminated by technology, new jobs created by the technology: programmers and service workers and salespeople. 

But, says Gary Burtless at the Brookings Institution:

Gary Burtless: At the moment, our shortfall is not a technology-driven, productivity-driven phenomenon. It is a shortfall in the demand for what American workers can produce.

And Burtless points out, about two million of the five million jobs that have been lost and not come back -- they were construction workers. It’s not like they were replaced by robots or better architecture software.

Burtless: It’s very hard to trace that drop in construction to any change in technology or productivity.

Another half-million or more of the layoffs: government workers. Government didn’t get more efficient. We just can’t afford them with the tax base we have right now. 

I’m Mitchell Hartman for Marketplace.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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