Why aren’t we seeing more jobs?
Photo: Victor Hanacek. Source: Picjumbo
The current economy is being celebrated as the longest economic expansion ever, but it sure doesn’t feel like it. It’s like a plate of mini-hamburgers. They’re enough to keep us from getting hungry, but not enough to really satisfy. Despite the latest jobs numbers, employment growth has been mediocre, at best. Why?
One issue is where the jobs are coming from. In a normal economy, there are three parties: owners, workers, and customers. Customers want the most product for the price they pay. Workers want the highest wages for the least work. And owners want the most return for the lowest risk. These conflicting objectives come together to give us reasonable goods at a reasonable cost delivered by reasonably paid workers with a reasonable return to the owners.
Source: JP Morgan Guide to the Markets, 2019q2
The marketplace is designed to reconcile these conflicts among the various actors, providing goods and services efficiently, when and where they’re needed. A case in point is McDonald’s. Almost everywhere, you can walk in and get decent food (and full-sized hamburgers) at a decent price. And it’s been estimated that one sixth of US workers have worked at a McDonalds restaurant.
Now look at the jobs that have been created in the US over the past three decades. Almost all of them have been in health care, education, and government. Who are the owners and who are the customers? Local school boards aren’t looking for a return on capital in their systems; nonprofit hospitals are trying to serve their communities with a standard of care and get paid to do it, and government agencies are just trying to do their jobs. In many ways, the owners are the employees. The typical roles are turned on their heads.
Source: St. Louis Fed
Our normal economy has been highly innovative, creating high-paying knowledge jobs that compete with the best in the world. But the service economy has generated jobs in compliance, accounting, and call centers.
If we want lots more jobs, they may come at the price of efficiency and competitiveness. Given how stagnant wages have been, we can’t afford that. The only other way is to encourage innovation, quality, and productivity. But that can take a while. Can we be patient?
Douglas R. Tengdin, CFA
Charter Trust Company
“The Best Trust Company in New England”