Good News: It Takes Fewer Jobs to Reduce Unemployment Than It Used To
How many jobs does it take to bring down those unemployment stats? According to a new paper from economists Dan Aaronson and Scott Brave of the Federal Reserve Bank of Chicago, less than it did in the 1980s and 1990s.
The magic number, after taking into account population growth, labor force participation, and other trends, is 80,000.
“That’s far below the 150,000 to 200,000 jobs required in the 1980s and 1990s, and significantly below the 100,000 to 150,000 figure often cited by economists today,” writes Ben Casselman at The Wall Street Journal. “Messrs. Aaronson and Brave argue those higher figures fail to take into account underlying changes to the U.S. labor force, notably slowing population growth and a long-term decline in the share of the population that’s working.”
The bad news is that with jobless rates hovering around 7.5 percent, the economy still has about 6 million fewer jobs than it needs, and even if the economy added 195,000 per month, it would take four years to catch up with demand. Plus, the study’s authors predict that once the unemployment rate reaches 5 percent or so, the economy will add only 35,000 jobs per month, suggesting economic growth in the future will be slower as well.
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