A short lesson about the history of U.S. employment

From Ray Fisman:

The wages of less educated men—which had been in decline since the 1970s—also enjoyed a brief reprieve in the late 1990s and into the following decade. Working with University of Chicago colleagues Kerwin Charles and Matthew Notowidigdo, Hurst found that these aggregate statistics for the United States as a whole have played out in miniature across the country (PDF), as one would expect if the housing boom were really behind the short-lived uptick in the employment and salaries for the bottom 20 percent. In regions where the housing booms were greatest, the employment prospects of low-skilled workers fared the best, while in places that the housing bubble passed by, the job prospects of such workers continued their inexorable decline. (The researchers also found that the increase in construction employment was only part of the explanation: Low-skilled service employment also went up in places with housing booms as local residents, feeling wealthier as a result of the increased value of their homes, spent more at restaurants, barber shops, and local retail establishments.)

Overall, Hurst and his co-authors estimate that roughly 40 percent of the increase in nonemployment (those who are unemployed but still looking for jobs, as well as those who have given up and exited the labor force entirely) since 2007 involves manufacturing jobs that were already lost during the earlier part of the decade. But the loss of these jobs was temporarily obscured by the housing boom that allowed low-skilled individuals to find work. (For the college-educated, there was at most a modest connection between the housing booms and employment.)

Once again, we are not as wealthy as we thought we were.  And there really is a significant structural component behind today’s sluggish labor market.