An excellent chart from Jacob Goldstein shows where jobs were lost during the recession and what kind of rebound we’ve had:
So this shows us a few things. One is to underscore the oddness of Naryan Kocherlakota’s observation that “the Fed does not have a means to transform construction workers into manufacturing workers.” It’s true, they don’t. But the biggest source of job losses is that we’ve transformed manufacturing workers into unemployed people, and the Fed really should have a means to transform the vast majority of unemployed manufacturing workers into employed manufacturing workers.
And this is how it looks across the board. You do have a big hit to finance and a bigger hit to construction, but the combined finance & construction share of the job losses is less than 50 percent. The manufacturing, retail, administration, leisure & hospitality, professional services, and transportation sectors all went down when aggregate spending went down and have recovered weakly as aggregate demand recovered weakly.
Policies that boosted aggregate would have majorly mitigated these losses.
The construction and state/local pictures, meanwhile, should be separated from finance. You could have eliminated the state/local losses via revenue sharing, or you might have deemed that to be an undesirable policy. Similarly with construction. Many, though not all, of these construction workers who’ve been sitting around collecting unemployment checks could instead have been paid to construct things. That could mean weatherization retrofits, it could mean mean train tracks, it could mean large obelisks. Spending money on construction projects at the pace and scale needed to put half of these people to work would have in practice entailed undertaking some low-social-value projects. But would the social value have been lower than the social value of having the unemployed workers do nothing? I don’t see it.
We’re experiencing a massive and largely avoidable plague of idless in which the country is producing far fewer goods and services than it is capable of producing.