Last week, I discussed the possibility that we had reached a depressed equilibrium, resulting in long-term or even permanent employment stagnation. I also discussed the possibility that the only routes out were large-scale technology shocks, geopolitical shocks or very large scale fiscal stimulus — events that drastically change broader market expectations.
Frustratingly, there are some superficial signs of recovery. Yet digging beneath the surface it is apparent that we are dealing with a depression in employment demand. These graphs produced by a blogger under the pseudonym Eugen von Böhm-Bawerk from Bureau of Labor Statistics data illustrate this well.
Since the recession, lots of part-time jobs have been created. Yet full-time jobs remain in much shorter supply:
This has meant that the percentage of the population with a full time-job is just where it was after the recession:
There has been significant growth in low-pay jobs, but decline in high-pay jobs, again illustrating a weakening of labour demand:
The extent to which this is fixable and may fix itself is unclear. In the long run, the sea may be flat and the weather may be sunny. But what this trend has already led to is strong growth for corporate incomes, and a decline in labour incomes. If in the long run this trend does not reverse we will face a bifurcation of society between the capital-owning elites still thriving on rents, automated industry and foreign wage labour, and a squeezed middle deprived of the well-paying jobs and careers that once supported and grew the middle class and increasingly dependent on part-time jobs, temporary work and welfare. Without middle class job and labour growth, demand in the economy as a whole may remain depressed.