America's Sectoral Shift Toward Idleness And Low Output

Something you continue to hear is that elevated unemployment is somehow just part and parcel of the fact that the economy is transforming over time because of trade flows, technology, demographics, consumer preferences whatever. This is wrong. Not because the transformations aren't happening, but because they're always happening. From 1995-2000 we had extremely robust economic growth not despite technological change but because of it. China was growing rapidly during that time, they were growing rapidly during the shallow recession of 2001, they were growing rapidly during the weak but sustained recovery after that, and they continued growing rapidly through the recession. Change is a constant, which is also what makes conservative prattling about "certainty" so odd.

Here courtesy of Matt Cameron is a pie chart showing which sectors have accounted for what shares of job losses since the recession began:

It's difficult to tell a coherent story about this as a question of shifts. Retail sales are down. Maybe that's because people shop on the internet more. But if people are shopping on the internet more, then employment in transportation should be going up. Or maybe employment in transportation is going down because someone invented a robot truck that's displacing truck drivers. But if that were true (which obviously it isn't) then we should have more manufacturing employment as we rapidly replace our existing supply of non-robotic trucks. It used to be that the PRC government was buying a lot of mortgage backed securities and this was leading to low mortgage interest rates that drove demand for new housing and thus employment in the construction sector. Then this demand for new single-family homes dried up but the PRC kept buying bonds. So with interest rates at historic lows, why not borrow money and pay these construction workers to build new schools?

Conversely, you can imagine a story in which over the long run fewer Americans make things (either houses or homes) because robots and Chinese people do it. In that case, we'd all have tons of stuff and spend more time at fancy restaurants and going on vacation. But leisure and hospitality employment are down. Or maybe we'd hire tons of new cops and preschool teachers. But state and local employment is down. We're not retailing and we're not wholesaling. We're not making things and we're not shipping things. This isn't a "fundamental change" away from doing one kind of thing to doing another kind of thing. It's a fundamental change away from producing goods and services to mass unemployment and reduced living standards.