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U.S. unemployment rate average, 1982-1993: 7.1%
U.S. unemployment rate average, 1994-2005: 5.2%
"I regret," said Alan Greenspan five years ago Tuesday, "that trade policy has been inextricably linked with job creation. It is difficult to find credible evidence that trade has affected the level of total employment in this country over the long run."
Perhaps characteristically, the former Federal Reserve chairman was regretting somebody else's mistake, rather than any he might have made. But his observation is theoretically sound. "Openness" to trade can cut prices, raise living standards, increase competition, reduce employment in some industries and create it in others. But total job creation and unemployment rates should reflect population growth, interest rates, growth and investment, not tariff rates or the level of cross-border competition. An interesting phenomena of the last two decades, though -- and simultaneous with a continuous opening of the U.S. economy -- is a steep and apparently lasting fall in unemployment rates as the U.S. economy has opened.
Since 1993, trade with Mexico and Canada has risen from 4.9 percent to 7.0 percent of U.S. GDP, and trade as a whole from 19.9 percent to 26.3 percent of GDP. How has the working world changed? Three long-term trends -- whose relations to trade and telecom is uncertain and probably quite complicated -- are as follows:
- Unemployment rates have dropped by 2 percent, and are apparently staying down. In the 12 years before 1993, the American unemployment rate averaged 7.1 percent. In the 12 years since, unemployment has averaged 5.2 percent. If workforce participation rates remain the same (see below), each percent is the equivalent of 1.3 million more jobs.
- Job creation and wage growth sped up in the late 1990s, and then slowed down again. Private-sector employment rose by 2.7 million jobs per year from 1993 through 2000. Since then, even excluding the 2001 recession, employment has risen by fewer than 2 million net new jobs per year, and wage growth has also slowed.
- Workforce participation, likewise, first rose and then fell. In December 1993, 66.4 percent of adults were working or looking for jobs. By January 2001, participation had risen to 67.3 percent; afterwards it fell as low as 65.8 percent and is now 66.1 percent.
International context finds the United States' unemployment trends are strong but not outlandish. The CIA's World Factbook finds the U.S.' 4.8 percent rate grouped with Japan, Switzerland, Britain, Australia, Ireland, New Zealand, and the Netherlands among the rich world's lowest-unemployment countries. Overall, and with some important notable exceptions, wealthy-world unemployment rates have been drifting down; rates in Australia, Ireland, the Netherlands, New Zealand, Portugal, Spain, and the United Kingdom are all two or more percent below the figures common in the 1980s. But unemployment has risen in Germany and Greece, stayed high in protest-happy France, and risen a bit in Japan too.
Developing-country data is less reliable. (Statistical agencies are less well equipped, informal sectors are larger, more people work in subsistence farming.) That said, the International Labor Organization's database finds unemployment in most countries ranged between Thailand's 2.5 percent unemployment rate and South Africa's 27 percent; some other figures include 8 percent in Chile, 9 percent in the Philippines, 11 percent in Jamaica and Egypt, 14 percent in Albania, and 16 percent in Ethiopia.
The Bureau of Labor Statistics has labor-market figures for the United States, and some international comparisons:
stats.bls.gov
OECD compares data for its 30 mid-to-upper-income members:
http://thesius.sourceoecd.org/vl=2813288/
cl=26/nw=1/rpsv/fact2006/
The ILO's very user-unfriendly database allows you, in theory, to find unemployment rates in all 190 member states:
http://laborsta.ilo.org/
The long look behind -- the Bureau of Labor Statistics and its ancestors have been counting unemployment rates and job creation since the 1890s. The Historical Statistical Almanac has figures from 1890 to 1970 (Volume 1):
http://www.census.gov/prod/www/abs/statab.html
Some highlights:
High unemployment: The highest unemployment rates in American history, between 1930 and 1933, varied from 15 percent to 25 percent. The most recent prolonged period of high unemployment was 1974-1982, with rates ranging from 7 percent to 11 percent. In between, with rates above 10 percent, was the mini-Depression of 1893-1897. Ranking these against trade policy is not helpful. The Depression era and the 1890s were high-protection periods, while the 1970s were considerably more "open" to trade than the higher-tariff 1950s and 1960s.
Low unemployment: Unemployment rates are lowest during big wars: civilian unemployment fell below 2 percent in both World War I and World War II, and figures for the Korean and Vietnam war eras are also low. Two peacetime eras of low unemployment: a 5.15 percent average between 1954 and 1960, the 5.2 percent average since 1993, and the 4 percent average for 1923-1928.
Workforce Participation: This is the fraction of adults who are (1) not working and (2) are actively looking for jobs. For most of the 20th century, the participation rate was stable at about 58 percent. It then rose steadily from 1970 to 2000, reflecting the rising number of working women, and peaked at 67.3 percent in 2000. Participation then dropped to 65.8 percent in February 2005, and has varied between 66.0 percent and 66.2 percent since.
Extreme cases -- The Central Intelligence Agency's World Factbook ranks 196 countries and territories by unemployment rates. Andorra places first, at 0 percent. Apparently not one person in the little Pyrenees republic is out of work. With a population of 70,000, the principality earns money by welcoming 9 million tourists a year, manufacturing "cigarettes, cigars and furniture," and selling rights to the .ad domain name. The CIA also observes that the Andorran national flag resembles those of Chad, Romania, and Moldova. Andorra on the web:
http://www.andorra.ad/
At the bottom, in 196th place, is Pacific-island republic Nauru, whose 90 percent unemployment rate implies that fewer than 800 of the island's 8000 adults have jobs. A Wikipedia article -- studded with jarring phrases like "Russian mafia," "detention center," "tax haven," "dirty money," "defecting North Korean scientists," "wasteland," and "single, aging desalination plant" -- implies that at least some Nauruans are nonetheless very busy:
http://en.wikipedia.org/wiki/Nauru
The CIA's unemployment table:
http://www.cia.gov/cia/publications/
factbook/rankorder/2129rank.html