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Jobs, Jobs, Jobs—and Nothing to Show for Them?

The commentary below is for the benefit of our readers from opinion makers and writers not associated with Euro Pacific. We do not guarantee the accuracy and completeness of third-party authored content. Opinions expressed are those of the writer, and may or may not reflect those held by Euro Pacific, or its CEO, Peter Schiff.
Caroline Baum
March 18, 2015

If Federal Reserve policymakers were to look solely at headline labor market indicators, they might be tempted to conclude that the U.S. economy had finally reached cruising altitude. The unemployment rate has fallen from a peak of 10 percent in 2009 to 5.5 percent, within the range considered to be full employment. Nonfarm payroll growth has averaged 275,000 a month over the last year, a pace last seen in the roaring '90s. 

Yet nothing else has that '90s feel: not the pace of economic growth, not capital investment, not productivity growth, not even Nasdaq 5000. The juxtaposition of solid job growth and tepid economic growth describes what the current expansion lacks: dynamism and innovation. These are the forces that drive productivity growth, allowing companies to produce more with less and provide a higher real wage to workers. 

Almost all of the increase in real GDP since the start of 2010 has come from growth in labor inputs, according to Douglas Holtz-Eakin, president of American Action Forum, a center-right think tank, and a former director of the Congressional Budget Office. Labor inputs include the number of jobs and the number of hours worked. The contribution of productivity has been miniscule.

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Caroline Baum is a journalist writing about macroeconomy at Economics21 at the Manhattan Institute. She is also a former Bloomberg columnist.

Neither Caroline Baum, or Economics21, or the Manhattan Institue is affiliated with Euro Pacific Capital.