Jobs and Workers: Which is the Chicken and Which is the Egg?

The US Bureau of Labor Statistics (BLS) says that the country’s labor force is growing at a rate of about 0.9% annually. That’s half the growth rate of the period between 1980 and 2000, but still better than the expected growth rate of 0.6% in 2020.

Some researchers believe that the reduced size of the US labor force gets half the blame for the slow US economic recovery since 2008-2009. The Washington Post reports:

The slower growth in the labor force arises from two factors, according to the BLS. First, the U.S. population is growing more slowly. Second, the percentage of Americans working or seeking work will continue to decline as the population ages.

Neither of these points is really arguable. But how does the second fit with a current US unemployment rate of 8.2%? Such a high rate would seem to indicate that there are more people looking for work than there are jobs available. Presumably, if there were jobs available, there would be more than enough workers to fill those jobs.

The BLS and other researchers point out, however, that in the long-run demographics rules:

[A]n economy adds jobs to accommodate the size of its labor force. Eventually, wage levels rise or fall to a level that leads to a “natural” level of unemployment. So the slowing growth in the labor force means that the growth in the number of jobs should slow, too.

In the long-run, the number of people who want jobs determines how many jobs there will be. And that determines the strength of the economy and GDP.

How many people choose to live and work in the US will determine future economic growth — workers are the chickens and jobs are the eggs. In the near term, though, jobs are the chickens without which the eggs won’t prosper.

Paul Ausick