Over the past year the economy has shed millions of jobs. Although job loss has slowed, the economy has yet to enter a period of net new job creation. The trend in private employment appears particularly intractable. Indeed, as Thomas Cooley and Peter Rupert put it, the labor market presents a dismal view by comparison with other indicators of economic activity, and not just because employment is a lagging indicator of recovery.

In their column Cooley and Rupert provide striking graphs showing total employment and the fraction of the population over 16 years of age who are employed. Here is the graph comparing total employment in the last five recessions.



Here is the graph depicting the ratio of employment to population in the last five recessions.



Cooley and Rupert comment: “Although job losses slowed in December, there is no evidence of recovery in employment. This will be a continuing drag on the economy and on the fiscal condition of both state and federal governments.”

In his most recent column, Cooley asks where job growth will come from. Nor surprisingly, Cooley urges that “policies designed to create new jobs in the economy should be directed at encouraging new firms.” I see no evidence that such policies will be forthcoming from the federal government in the next year. On the contrary, among other things, the tax increases built into Obama’s budget will discourage new firms.

Cooley appears to be a moderate man. He is the Paganelli-Bull professor of economics and former dean of the NYU Stern School of Business. Yet Cooley allows that the Obama administration has “created some very large sources of uncertainty that impact small businesses and those who would finance them. By pursuing a huge policy agenda without much success they have created large-scale uncertainty about health care costs, cap-and-trade policies, corporate taxes, taxes on incomes over $250,000 and estate taxes.”

Will new jobs be formed on net with the scheduled tax increases and regulatory overhang? It is odd that so little serious attention has been devoted to the problem of job growth in the private sector except insofar as it can be used as an argument to enlarge the size and scope of the government itself.