Economics 101: The lack of "churn" in the economy

From The Wall Street Journal:

Workers Stay Put, Curbing Jobs Engine
Decline in Turnover Complicates Unemployment Picture
By Ben Casselman

Gridlock in Washington delayed last week’s jobs report. But blame gridlock of a different kind for holding back the job market itself.

Friday was meant to be the day the Labor Department released its monthly snapshot of employment and unemployment. But though closely watched by investors and policy makers, the report was deemed insufficiently “essential” to escape the partial government shutdown that began last week. Economists expected the report to show that the pace of hiring held roughly steady at 181,000 jobs in September, but no one will know for sure until the shutdown ends.

Even when the numbers are released, however, there is a strong argument that they aren’t the most important gauge of the health of the labor market, at least right now. That’s because the headline figure measures net growth—all the new jobs that were created in a month minus all the ones that were destroyed.

By that measure, the job market is showing steady improvement. More than four years after the recession officially ended, layoffs are back below precrisis levels. New claims for jobless benefits—one of the few pieces of official data unaffected by the government shutdown—are near a six-year low. Job creation has been slow but steady: Private employers have added an average of about 190,000 jobs per month over the past year, a pace that has stayed remarkably consistent amid uneven economic growth.

But focusing on net growth masks what’s going on beneath the surface—or rather, what isn’t going on. Workers aren’t quitting their jobs to pursue better opportunities. Companies aren’t filling positions when they do open up.

Much more at the link.

Lack of job turnover, or “churn,” was one of the first things I noticed about the economy during the recession. My wife is a registered nurse, and hospitals have traditionally had a high turnover of RNs; it’s a well-paying job, but it’s a tough one, and there are always — or so it seemed — other nursing jobs out there.

But when the recession hit, at least locally, turnover of RNs greatly declined. A lot of it was due to nurses having husbands who had lost their jobs, or were worried about losing their jobs, and who couldn’t afford job instability or losing accrued seniority. For the first time in a long time, new nursing school graduates didn’t have immediate hospital nursing jobs available.1 Some who had already passed their boards and were licensed were working as nursing assistants until RN slots opened up.

That situation didn’t last too long for nurses, but it has persisted in many other fields: even if you are offered a new job, changing jobs means a loss of seniority, and if the company to which you move has to lay people off, being at the bottom of the seniority list is a bad place to be.

Another change is in the retirement age. Traditionally 65, the actuarial problems facing Social Security have pushed the full retirement age up in stages, so that anyone born after 1960 has a full retirement age of 67; that’s two more years that older workers will stay in the workforce. The increasing physical fitness of workers in their sixties, combined with jobs which have less physical stress and 401(k) plans having lost value add up to people working up not until their full retirement age, but beyond in many cases.2 And that means, as older workers stay in their jobs longer, fewer slots open up for younger workers.

Your Editor would like to blame President Obama and his policies for the lack of jobs opening up for younger workers, but some of this would be the case even if the voters had had more sense in 2008 and 2012. The increase in the retirement age has been on track for many years now; that would have been unchanged.

However, the damage being done to the economy by the Patient Protection and Affordable Care Act, and the uncertainty concerning the costs of insurance — uncertainty as to how much they will increase, not if they will increase — has a lot to do with it. Smaller companies are holding back on job creation, because they are unsure of whether they can afford it, and other start-ups which might have occurred didn’t occur, due to the same business decisions.

Individual workers have just as many concerns as do businesses. or start their own companies. The Wall Street Journal wondered if the PP&ACA would cure “job lock.” But reality has somewhat different, as the current statistics show: people are not moving to other jobs, while, if the PP&ACA were really making it easier to do so, we should see more movement. The jury is still out on that, because job creation is so pathetic, and so many of the jobs which have been created are part-time jobs, and much of that is due to firms keeping employees under 30 hours per week just so they won’t have to provide health insurance. Are workers not switching jobs more because they are afraid that, whatever they don’t like about their current insurance, it might be worse at another company due to the PP&ACA, or are workers not switching jobs because the PP&ACA discourages job creation in the first place? The answer is probably some of both.

President Obama took office 4½ years ago, promising to stimulate our economy and get unemployment down, and he claimed that his universal health care coverage plan would create more jobs as well; the stimulus plan was a massive failure by the scoring system the proponents themselves set up, and Obaminablecare is having depressing effects of job creation and growth.

  1. When my wife was graduated from nursing school, she had been hired and was an RNA, or registered nurse applicant, doing all of the work RNs do, just under supervision, until she had passed her boards. Had she not passed, she’d have been demoted to being a nursing assistant.
  2. Your Editor’s full retirement age is 66, but he will continue to work as long as he is physically able.

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