The American economy is destroying jobs, and that's a good thing.
It is in destroying jobs that the economy improves and makes it possible for the standard of living of all Americans to increase. This constant churning means that even a "stagnant" American job market is extremely dynamic, and that the ranks of the unemployed are not necessarily the dispossessed of the earth, as Democrats tend to portray them.
Keep this in mind as Congress gears up for a debate on whether unemployment benefits should be extended beyond their normal six-month term for the fourth time in the past two years. Democrats will attack anyone opposing this extension as a heartless extremist attempting to trample on the poor. But an extension of benefits might, perversely, prolong unemployment, and it will serve to dampen the dynamism of the American economy, which is its greatest asset.
In any given year, roughly 10 percent of all jobs in the American economy are destroyed, while an equal number rises up to take their place, according to the latest Economic Report of the President. The trick, of course, is to create more jobs than are lost. Since 1980, according to Michael Cox of the Federal Reserve Bank of Dallas, "Americans have filed 106 million initial claims for unemployment benefits, each representing a lost job." But during the past decade, the economy has still added a net 40 million new jobs.
Even when the economy isn't creating net new jobs, as has been the case recently, it's creating new jobs. Payroll employment was stagnant last year. But between 3.5 million and 5 million workers entered new jobs each month in 2002. Even during a "jobless recovery," the majority of workers looking for jobs in any given month is different from those workers seeking jobs the next month.
Since 1970, the median duration of unemployment has been 6.6 weeks when the economy is growing, and 8.2 weeks immediately following a recession. In roughly 40 percent of cases, the period of unemployment is 5 weeks or less. So the unemployed aren't a single class of people, but a group constantly changing as people cycle in and out.
In many cases, job turnover -- although painful -- is a very good thing. It is by switching jobs that people learn new skills and find a better match for the skills they already have, thus earning higher wages. A typical young worker has seven jobs during his first 10 years in the job market. A third of that worker's wage growth will occur when leaving one job for another.
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