A Tale of Two Labor Markets: Today and ’83-’84

Today’s jobs report provides yet more evidence that this is a recovery in name only. The 9.2 percent unemployment rate is certainly a serious problem, but you can understand the problem a little better by looking at the percentage of working-age Americans who are actually working. This percentage declined again to 58.2 percent in June, and is well below what it was when the recovery officially began.

The chart below shows the change–during the 24 months of this so-called recovery–in the percentage of people working and compares it with the recovery after the most recent deep recession of 1981-82. You can see the general recent decline. In contrast the percentage of people working rose sharply in 1983-84. So this time there really has been no recovery in the labor market.

The chart also tells you what might have been. For example, if the employment to population ratio had increased (rather than decreased) in the past 24 months by as much as it did in the 24 months following the 1981-82 recession, then 8.9 million more Americans would have jobs than actually have jobs.

Yesterday the House Budget Committee released a report on the jobs problem and, while mentioning several explanations, argued it is due to an economic policy problem, including the increase in the debt and deficit caused in part by the stimulus packages and spending boom of the past few years. My Bloomberg News column of yesterday shows that the Keynesian revival, which has its ten-year anniversary this month, hasn’t helped.

About John B. Taylor 117 Articles

Affiliation: Stanford University

John B. Taylor is the Mary and Robert Raymond Professor of Economics at Stanford University and the Bowen H. and Janice Arthur McCoy Senior Fellow at the Hoover Institution. He formerly served as the director of the Stanford Institute for Economic Policy Research, where he is now a senior fellow, and he was founding director of Stanford's Introductory Economics Center.

Taylor’s academic fields of expertise are macroeconomics, monetary economics, and international economics. He is known for his research on the foundations of modern monetary theory and policy, which has been applied by central banks and financial market analysts around the world. He has an active interest in public policy. Taylor is currently a member of the California Governor's Council of Economic Advisors, where he also previously served from 1996 to 1998. In the past, he served as senior economist on the President's Council of Economic Advisers from 1976 to 1977, as a member of the President's Council of Economic Advisers from 1989 to 1991. He was also a member of the Congressional Budget Office's Panel of Economic Advisers from 1995 to 2001.

For four years from 2001 to 2005, Taylor served as Under Secretary of Treasury for International Affairs where he was responsible for U.S. policies in international finance, which includes currency markets, trade in financial services, foreign investment, international debt and development, and oversight of the International Monetary Fund and the World Bank. He was also responsible for coordinating financial policy with the G-7 countries, was chair of the working party on international macroeconomics at the OECD, and was a member of the Board of the Overseas Private Investment Corporation. His book Global Financial Warriors: The Untold Story of International Finance in the Post-9/11 World chronicles his years as head of the international division at Treasury.

Taylor was awarded the Alexander Hamilton Award for his overall leadership in international finance at the U.S. Treasury. He was also awarded the Treasury Distinguished Service Award for designing and implementing the currency reforms in Iraq, and the Medal of the Republic of Uruguay for his work in resolving the 2002 financial crisis. In 2005, he was awarded the George P. Shultz Distinguished Public Service Award. Taylor has also won many teaching awards; he was awarded the Hoagland Prize for excellence in undergraduate teaching and the Rhodes Prize for his high teaching ratings in Stanford's introductory economics course. He also received a Guggenheim Fellowship for his research, and he is a fellow of the American Academy of Arts and Sciences and the Econometric Society; he formerly served as vice president of the American Economic Association.

Before joining the Stanford faculty in 1984, Taylor held positions as professor of economics at Princeton University and Columbia University. Taylor received a B.A. in economics summa cum laude from Princeton University in 1968 and a Ph.D. in economics from Stanford University in 1973.

Visit: John Taylor's Page, Blog

1 Comment on A Tale of Two Labor Markets: Today and ’83-’84

  1. in the 80’s th u s was a manufacturing behemoth, we made everything we consumed. today the only thing we build are pizzas and double whoppers (with cheese)with virtually every thing else imports, making for a long hard slog going forward

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