Sales Have Not Come Back

Tyler Cowen cites David Wessel who writes “What’s wrong with the American job engine? As United Technologies Corp. Chief Financial Officer Greg Hayes put it recently: ‘Sales have come back, but people have not.'” Cowen argues that this shows aggregate demand is being overrated as a source of labor market woes.

That makes a lot of sense, except sales haven’t come back:

If you compare sales (or any other measure of demand) today to where they were at the low point, then yes sales are back. Growth is back. But if you compare employment today to where it was at the low point, then jobs are back too. But sales are below trend. Demand is below trend. And employment is below trend. Needless to say, like all economies at all times throughout history there are also pro-growth structural reforms that could benefit the American economy. But just as “sales have come back, but jobs have not” would be a powerful argument that AD is overrated were it true, the fact that it’s not true surely has some force.