Pethokoukis, Economics, U.S. Economy

America’s missing 12 million private-sector jobs

Credit: MKM Partners

Credit: MKM Partners

The budget deficit isn’t the only gap that should worry US policymakers.

Consider: The U.S. lost 8.8 million private sector jobs during the Great Recession. Since the beginning of the jobs recovery, we have gained back 6.8 million, leaving a gap of about 2 million. As economist Michael Darda calculates, if average monthly job gains remain close to the 12-month average of 180,000 for the private sector, the level of private sector jobs will rise to an all-time high in just under one year.

But even then, private-sector jobs will still be way below the 1990-2007 trend. Currently the shortfall is nearly 12 million missing jobs. The “jobs gap” remains a frightening maw gobbling up the hopes and dreams of American workers.

2 thoughts on “America’s missing 12 million private-sector jobs

  1. Part of the issue is that companies constantly die and are replaced by new companies which create jobs. The replacement rate of employer firms hasn’t kept up (many new firms are single person contracting firms that aren’t meant as a long term business but were just fill ins). One problem is that there is a major lack of investment for early stage companies.

    The real estate and stock market drops do account for some “angel” investors dropping out, including the earliest not-well-tracked “friends&family” stage investors who lost net worth that might have gone to investing. Or those who were saving up equity in their home to later borrow against to start a business were set back. Many of these small investors are also cautious about risk taking in a slow economy since they can’t afford to gamble as much as a wealthy investor. Since it takes time for companies to grow, it takes time for employment to get back on track if there is a too much of a delay in company formation.

    In general there aren’t good frameworks for funding a certain class of smaller or early stage startups for those without a lot of wealthy connections. Yes, it is a sales process, just as a business involves sales, but an entrepreneur may be fine selling into a niche he knows which he is building a business around, but have trouble finding and selling wealthy people on investing. Laws make it difficult for companies that may have the potential to grow to accept funds from non wealthy investors,accredited investors are better, but there are fewer of those. A company may never grow to need VC, but it is safest to only take accredited money just in case. That squeezes out a large class of comfortable but not wealthy people and prevents them from investing and makes it harder for startups to get going.

    There is a “funding gap” at a certain level of startup needs. Technology reduces the needed capital to start *some* kinds of businesses, but for others *more* capital is needed than in the past to be able to compete with big companies or to develop a new innovation to compete with what is out there. Not every idea can start lean and small. Many potential business ideas are in the difficult position where they can’t be bootstrapped, but they don’t have enough to show to raise a larger amount of capital, or they may not have an idea that has a large enough return to go for a larger round of capital or to attract a wealthy investor. They may need only $50k, which is too risky for a bank, out of the realm of their friends & family. It may be an idea which could provide an ok return, but they don’t expect to become the next Apple so they can’t get the time of a wealthy investor who is looking for a high payout among all those claiming to be able to give it to him who flock around wealthy people.

  2. my question is this.
    recently they have saying 165,000 jobs were created
    i want to know if these were REAL full time jobs or just like “seasonal” part-time jobs.
    i would think to keep the middle class alive it would require real employment like in manufacturing. Lately it seems they tend to be “service” industry and part time seasonal stuff

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