April 29, 2013
The S&P 500 is near record highs, having finally regained all it lost in the 2008 financial crisis. It would be cause for celebration if it didn’t feel so out of touch with the “main street” reality of continued high unemployment. As a recent New York Times headline read, “recovery in the US is lifting profits, but not adding jobs.”
The NYT goes on to blame the divide between rising corporate profits, recovering stocks, and stubborn unemployment on big gains in productivity over the last few years. The article notes that the giant industrial conglomerate, United Technologies, “does not need as many workers as it once did to churn out higher sales and profits.”
While United Technologies (and other manufacturing firms) may not be adding jobs, it’s strange to blame today’s high rate of unemployment on the trend. Due in large part to automation, manufacturing jobs have been disappearing for over 30 years. During that period, unemployment has been as high as 10.8% and as low as 3.8%. A better headline might read, “recovery in the US is lifting profits, but not adding traditional jobs in manufacturing and that’s nothing new.”
It’s rarely noted, but even as manufacturing jobs have steadily decreased, total manufacturing output has steadily grown. Since World War II, manufacturing output in the US has risen over 700%. While rising productivity is often demonized as a job killer, in truth, it is a very powerful force for good in the modern economy.
The time and creativity that productivity growth frees—and it’s been happening since the Industrial Revolution—is responsible for every modern invention from healthcare to high tech, smartphones to non-invasive surgery. If humans hadn’t started using machines to do some things for us, most would still be working in the fields with few moments to spare pondering economic theory, let alone inventing new technologies.
This article was posted: Monday, April 29, 2013 at 4:44 am