Economists surveyed by the WSJ are looking at the huge numbers of long-term unemployed and concluding that about a quarter of the 8.4 million jobs eliminated since the recession began won't be coming back.
It isn't just weak growth that's damping job growth. "Companies, in the name of making money, substitute against labor through outsourcing or technology," said Allen Sinai of Decision Economics. Wages and benefits make workers "so expensive that who wants to hire them? As a result, the displaced workers won't be rehired unless we have double the growth rate we're expecting."
So what happens? Well, if this were, say, the 1990-91 recession, some of those folks might find work in new industries - or perhaps start their own businesses. But in a Harvard Business Review article that's getting lots of attention, Edmund Phelps and Leo Tilman wonder whether that's in the cards.
Ever since Alexander Hamilton, the U.S. economy has been about ideas, experimentation, and exploration: businesspeople imagining new concepts and launching new ventures; entrepreneurs engineering new products or methods based on new ideas; marketers conceiving of niches for new products or new niches for old ones; managers and consumers assessing novel products; and financiers with strategic vision judging which innovations to back. Historically, the nation's dynamism--its ability and proclivity to innovate--has brought economic inclusion by creating numerous jobs. It has also brought real prosperity--engaging, challenging jobs and careers of self-realization and self-discovery.
Dynamism has been in decline over the past decade. Venture capitalists bemoan a dearth of innovative ideas, and investors bewail a precipitous drop in their rates of return. IPOs of venture-capital-backed firms have steadily declined from the levels of the 1990s. Total venture investment is now running at less than $20 billion per year. Institutional investors and equity analysts now pressure CEOs of public companies to hit steadily growing earnings targets. That pressure distracts from long-term value creation. And the patent system, which at first encouraged invention, now threatens inventors with a tangle of infringement suits.