The economy may go through boom and bust cycles on a regular basis, but don't expect job growth to be part of the upswings any more. Future recoveries from recession will likely be "jobless" because technological advances now enable troubled firms to shed middle-income jobs in favor of machines and automation. If these jobs are not recouped during subsequent economic recovery, future recoveries may well remain jobless.
That's the dour view of economists Henry Siu (University of British Columbia) and Nir Jaimovich (Duke University), who point out in a recent article that "a jobless recovery is not simply an ‘economy-wide‘ delay in firms hiring again. Instead, it can be traced to a lack of recovery in a subset of occupations; those that focus on routine or repetitive tasks that are increasingly being performed by machines."
This has been the case in the last three recessions, from 1990-91 to 2000-01 to 2008-09, they add. Previously, hiring would surge as businesses began to gear up again from a slowdown. Following each of the 1991, 2001, and 2009 recessions, per capita employment in routine occupations fell and never recovered, they point out.
The reason for this structural change in labor markets is the rise of automation, Siu and Jaimovich explain:
"Automation and the adoption of computing technology is leading to the decline of middle-wage jobs of many stripes, both blue-collar jobs in production and maintenance occupations and white-collar jobs in office and administrative support. It is affecting both male- and female-dominated professions and it is happening broadly across industries –manufacturing, wholesale and retail trade, financial services, and even public administration."
While Siu and Jaimovich may be right on target with their analysis of what is happening to existing traditional jobs, they fail to account for the wide range of entrepreneurial and new work opportunities that the same technology is creating. In today's DIY ("do it yourself") economy, there is an abundance of online resources for developing, testing and marketing new business ideas. Cloud computing makes enterprise-class compute power and applications available for pennies at the touch of a button. Mobile frees up users from the constraints of physical offices and workplaces. Social media opens up markets at virtually no cost. 3D printing enables customized mass production of everything from food to houses at any location.
This levels the playing field for new players. Plus, larger companies are in critical need of people with the skills to put these technologies into practice. Automation is causing a painful retrenchment of many traditional jobs. At the same time, it is creating new ways of working that have yet to appear on economists' radar screens.