Miracle workers? Explaining the late-90s US jobs boom
In the late 1990s, the United States achieved a 'full employment economy': everyone who wanted to work at the market wage could find a job. This was coupled with a period of low inflation, challenging economists' established ideas about these two crucial economic factors. In the context of a much more challenging jobs climate, this report revisits this remarkable period in detail.
This report traces the life history of the US jobs miracle, its causes and effects, and its lessons for today's economic recovery. While it focuses primarily on the US context, the American experience can cast light on the UK's own bid to boost growth and employment in the wake of recession.
In the US, the full employment period ran from 1997 - the year in which the national unemployment rate moved below the consensus 'full employment threshold' of 4.5 per cent - until 2000, when unemployment was still mostly at or below this level but beginning to climb. The full employment economy translated into gains for many different cross-sections of Americans, but these gains were not necessarily distributed evenly across gender, race and age groups, or regionally across the US.
This full employment economy was the product of myriad forces, including fiscal and monetary decisions, demand for technology and low-cost capital, demographic factors, and research and development spending. Although full employment has not generally been attributed to government policy interventions - and, unlike today, increasing employment was not an explicit political aim - there were policy foundations and decisions that created the conditions for growth and increased the individual incentive to work.
In terms of job losses, the more recent 'Great Recession' has been devastating. Particularly damaging - in the US as in the UK - have been the growth of long-term unemployment and the part-time 'underemployment' of people who would rather be working full-time. The recovery of jobs has been slow compared to the more rapid recoveries from other recent recessions, despite the government's interventionist approach to reducing unemployment. In this climate, inflamed by the politics of an election year, some of the lessons and tactics of the 1990s are finding their way onto today's agenda, alongside some more novel approaches, which are summarised and discussed in this report.