Magazine article Economic Trends

The Economy in Perspective

Magazine article Economic Trends

The Economy in Perspective

Article excerpt

The big picture point by point, or "Sunday Afternoon on the Island of La Grande Jatte" (Georges Seurat, 1886) ... Economists who study labor markets and industrial organization have long recognized the general public's incomplete view of the dynamic processes at work in the U.S. economy that create and destroy both jobs and business establishments. When the evening newscaster blithely announces that 57,000 jobs were created in September, few people recognize that between August and September a very large number of people moved into new jobs, even as a similar number left old jobs; the 57,000 figure is the net result of two gross flows moving in opposite directions. The public will hear more about these underlying factors now that the Bureau of Labor Statistics has begun regular publication of its Business Employment Dynamics (BED) data.

Because these newly available statistics are collected from more than 6 million nonfarm business establishments in the United States, they make it possible to examine employment consequences from the perspective of business establishments. For example, the BED data indicate that during the fourth quarter of last year, the net loss of 70,000 jobs from the private sector resulted from 7.746 million job additions and 7.816 million cutbacks. Jobs were added when expanding establishments contributed 6.1 million jobs and opening establishments contributed 1.6 million. During the same quarter, jobs were destroyed when contracting establishments cut 6.2 million jobs and closing establishments eliminated another 1.6 million. The result of these factors, the net loss of 70,000 jobs mentioned earlier, represents less than one-tenth of 1 percent of net employment, but comes from a nearly 15 percent reallocation of labor (7.2 percent new jobs and 7.3 percent lost jobs) in just one three-month span. During that period, roughly one-fourth of the 6.4 million establishments tracked in the BED data set added jobs, one-fourth cut jobs, and one-half displayed no change.

Clearly, when gross flows are as consistently large as those revealed in the BED data, it is time to confront the reality of how the U.S. economy operates to reallocate employment across jobs and business firms. The 1992-2000 economic expansion provides an instructive example. During that period, job gains from expanding establishments gradually rose from 5. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.