Recession = Weak Job Creation

Viewing the economy as a dynamic rather than a static system yields paradigm-shifting insights. The most spectacular in my experience has been understanding that the rate of job losses is much less important than the static perspective can understand. So, the fact that that media trumpets "job loss" stories during downturns emphasizes exactly the wrong thing. What causes a net decline in employment is not, in fact, job losses but a collapse in hiring.

David Leonhardt pulls down some of the latest data to make this point. But Leonhardt doesn't go any further with this line of analysis, concluding instead, "Why? How should the government respond? How should the country’s long-term economic policies be changed to reverse this long-term decline in hiring? All are good, hard questions."

Let's not pull punches here. The answers are not elusive, and point directly toward policies that encourage job creation and job creators, and sharply away from policies that aim to save jobs. On that note, the Obama administration's language about "creating or saving" 2-4 million jobs is unhelpful. More talk among the political class about spurring job creation and new venture creation would be a good first step towards actual policies along these lines. Payroll tax cut, anyone? 

And help me out here, but why does California have an $800 fee to start a new LLC? Oh wait, maybe they don't (because this court seems to have ruled it an unconstitutional tax.  We'll see ...)

Comments

[Sluf]

It is easy to "save 4 million jobs" as the objective measurement is always a subjective opinion. You can apply the same logic to retail store sales or "dealer price" on an automobile -- using the administration's logic, you effectively made more money because we saved you money on the purchase.

Very subjective indeed.

Sluf

[Tim Kane]

Sluf,

There's an old (and sexist) joke about a spouse who comes home from shopping after a big sale with multiple big bags filled with merchandise under each arm, saying, "Look how much money I saved!"

[J]

Of course, saving jobs prevents more people from not having jobs which eases up the pool size for applicants for a job. The more unemployed people there are, the more laid off, the fewer people there are spending money in the economy keeping other jobs afloat. Isn't that pretty basic ECON stuff.