Jobs and Creative Destruction
W. Michael Cox and Richard Alm look at the data on gross flows in the labor market.
New Bureau of Labor Statistics data covering the past decade show that job losses seem as common as sport utility vehicles on the highways. Annual job loss ranged from a low of 27 million in 1993 to a high of 35.4 million in 2001. Even in 2000, when the unemployment rate hit its lowest point of the 1990’s expansion, 33 million jobs were eliminated.
The flip side is that, according to the labor bureau’s figures, annual job gains ranged from 29.6 million in 1993 to 35.6 million in 1999. Day in and day out, workers quit their jobs or get fired, then move on to new positions. Companies start up, fail, downsize, upsize and fill the vacancies of those who left…
Job growth will come, as it always has in the past. The economy, meanwhile, is as busy as ever in shifting labor from one use to another to make the country richer and more productive.
This is the picture of the economy that I tried to paint in The Great Displacement. Old jobs are being destroyed by changes in production processes, while new jobs are being created. Both job creation and job destruction are taking place at rapid rates.
For Discussion. For the 1930’s, we only have data on the net change in employment. If we also had data on gross flows (tracking all movements into and out of jobs), do you think that it would show a higher or a lower rate of job destruction than what we observe today?