Slide 1
The number of jobs in the U.S., through December
This graph illustrates a number of points:
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The loss in jobs from 2007-2009 was huge
There has been some improvement since around the middle of 2009. Note the slightly
upward slope of the line, which shows that a small number of jobs have returned.
However, the number of jobs today is roughly equal to the number of jobs in 2003-04. Far
more disturbing is the fact that today there are fewer jobs in our economy than there were in
2000 (the “lost decade?)
While we have lost jobs, the size of the US population has increased (although the growth
rate for 2000-2010 was the second lowest on record).
All of this means that today there are more people competing for fewer jobs. In other words,
the labor supply is increasing while the demand for that labor is decreasing (as shown by the
loss of jobs). As you know from class discussion, this means that wages won’t increase. The
best we may hope for is that wages don’t decrease (recall the supply and demand curve we
talked about in class.
Slide 2
Private-sector jobs: a ‘lost decade’
This graph is very similar to that in Slide 1, but with one very significant difference: this one
pertains only to private sector jobs. A couple of conclusions can be drawn:
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The situation in the private sector is slightly worst than when the public and private
sectors are considered together (which was done in Slide 1).
o There were roughly 112m private sector jobs in 2000
o There are roughly 108m private sector jobs in 2011. The difference between
these two figures is somewhat larger than the 2000-2011 difference in Slide 1.
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Here’s an interesting way to look at Slide 2: in 2000 there were about 132m jobs, and in
2011 there are about 130m jobs (see Slide 1) for a difference of 2m
o As noted above, the corresponding figures for the private sector are 112m and
108m (see Slide 2).
o Thus, since there was a loss of 4m jobs in the private sector, and only a loss of 2m
jobs altogether (Slide 1), this means that most of the newly created jobs were
government (public sector) jobs.
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The compensation-related implications are the same as in Slide 1, although somewhat
exaggerated if you’re working in the private (i.e., non-governmental or public) sector.
Slide 3
Unemployment rates, by education level
The message here is very clear: education (human capital investment) at least makes it less
likely you’ll be downsized. This is very easy to understand:
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As discussed in class, today’s jobs require considerable knowledge and expertise that is best
gained through education (once again, human capital theory)
o This argument is supported by the fact that the annual allocation of H1-B visas is
exhausted in a matter of weeks
The effects of education on job security are likely to strengthen in the near future.
o As you know from class presentation, companies will have an ever increasing need
for “knowledge” workers.
o The US is not producing enough of these workers, especially in the areas of
engineering, math, and science.
 Recall, too, that the Latino population has a very low high school graduation rate
o While the US has traditionally placed great reliance on international students studying
here and then residing here at the completion of their studies, more and more of these
individuals are returning to their home countries
It is likely, then, that “knowledge” workers (i.e., well-educated) will be in strong demand
although the supply will be low. This, as you know, should put upward pressure on wages
Slide 4
Teenagers’ unemployment rate, by race
This graph is related to the one in Slide 3. Note the extremely high unemployment rate of
African American teenagers. This is not good on many levels. Also, there isn’t an excessive
amount of optimism to be found here. Recall the low high school graduation rates of this group,
as well as the low college attendance rates. Moreover, as we showed in class, the gap between
the college attendance rates of Caucasians and that of African Americans has steadily increased
in the last two decades. Given the need for knowledge workers, this suggests that rates of
unemployment for African Americans will likely continue to exceed that of Caucasians even
after the teen years.
In terms of compensation, the high rates of teenage unemployment plus the relatively low rates
of educational attainment plus the limited number of jobs requiring lower-skill levels, all suggest
that the income disparity between African Americans and Caucasians will likely remain if not
worsen.
Slide 5
Employment-population ratio
This is very disturbing. As you can tell by the title of this graph, the percentages on the y-axis is
the ratio of the number of people employed (“employment”) to the total population. In other
words, “employment” is the numerator of the fraction, and “population” is the denominator.
Since 2000, the decline in this percentage means that fewer and fewer people are working
relative to the size of the total population. Note the amazingly sharp decline that occurred
between 2006 and now. While there was a very slight uptick in the first half of 2009, this didn’t
seem to be a lasting trend.
The compensation-related implications of this are very clear – the labor supply (defined in terms
of the people available to work) has increased while the demand has not. Once again, supply and
demand determines wages. This suggests that meaningful increases in wages are unlikely to
occur for several years. Indeed, we may be very fortunate to maintain our current levels.
Slide 6
Unemployment, and under-employment
Bad news all around here. This is the U6 unemployment rate that government publishes each
month. Currently around 16% of the potential labor force are either unemployed
(“unemployment”) or are working part-time even though they want full-time employment
(“under-employment”). Compare this rate to that of 2000, or even 2007. Once again there was a
huge effect around 2007 – another indication of just how severe this so-called “Great Recession”
really is. The one “bright spot” is that at least this rate doesn’t seem to be increasing (the flip
side, however, is that it doesn’t appear to be decreasing).
The implication for wage levels is very clear – the supply of labor clearly exceeds the demand
for labor, hence the downward pressure on wages.
When you look at these graphs collectively, the inescapable conclusion is that there is a
very large imbalance between the supply of labor and the demand for that labor. Hence there are
few reasons to believe that wage levels in the country will increase significantly in the near term.
Furthermore, given that there are fewer jobs in the country now than in 2000, this “near term”
effect is likely to be “medium to long-term.”
However, the need for knowledge workers will intensify as jobs continue to become more
sophisticated and global competition intensifies (which it undoubtedly will). This, of course,
will put upward pressure on the wages of these employees. But not all groups will benefit from
this, given the differing high school graduation and college attendance rates in the country.
Moreover, because the US isn’t producing a sufficient number of “knowledge” workers, we’ll
continue to place greater reliance on immigrants, as will most of countries (as you know, the
world is aging at a rapid rate). This will also make these skilled individuals worth more to
companies (which means their “price” will increase). Taken together, this suggests that income
disparity (which we talked about in class) will become greater.