clock menu more-arrow no yes

What President Trump doesn’t understand about job creation (and destruction)

People in line for a job fair.
People in line for a job fair
John Moore / Getty Images

Donald Trump is poised to put “dealmaking” at the center of the presidential economic policy making tool kit. Even before taking office, the president-elect has claimed to save thousands of jobs by cajoling companies into keeping jobs in the United States. Outside of concerns about the long-term sustainability of such deals, just how much of a change would such deals bring to the US labor market? How many of these deals would Trump have to make to significantly improve the jobs situation in the United States?

The short answer is that even if Trump made browbeating companies his full-time job, he’d find it impossible to significantly affect national employment figures.

One way to put into perspective the impact of Trump’s deals is to compare them to the number of new jobs created during a single month. And the best source for this data is the monthly Employment Situation report from the Bureau of Labor Statistics. The report tells us how many jobs were added to the jobs market over the course of the previous month. For example, in November 2016 total employment rose by 204,000.

But there is far more job creation in the United States than that single number suggests. Remember that the 204,000 jobs from the Employment Situation report are the net number of jobs created. In other words, those are all the jobs added above and beyond all the jobs destroyed that same month. The economy creates many more jobs in a month than 200,000-plus. How many? Luckily the Bureau of Labor Statistics also published another monthly dataset that contains such data, the Job Openings and Labor Turnover Survey (JOLTS).

In November 2016, the most recent month we have data for, 5.2 million workers were hired. So in one month alone, 5.2 million jobs were created in the United States. At the same time, 5 million jobs were destroyed — either because workers were laid off or the worker quit. The net number of jobs created in a month, in short, amounted to roughly only 4 percent of all job creation.

Let’s use the most famous example of Trump “saving” jobs to see how that job creation stacks up to net and gross job creation. After the presidential election, Trump announced that Carrier, an air conditioner and furnace manufacturer, would keep 800 jobs at an Indiana factory that were previous slated to end.

Assuming these jobs are all net job creation — they won’t be set off by job destruction elsewhere — a Carrier-type deal is equal to 0.4 percent of the net jobs added in November. As a proportion of gross job creation, the Carrier deal would be virtually impossible to spot: 0.015 percent.

For an individual worker, it doesn’t matter how small of a drop in the ocean her job is if it’s saved. But for policymakers and anyone interested in the overall health of the US labor market, we should be concerned that these deals aren’t an even smaller fraction of flows in the labor market.

You don’t want an economy in which zero jobs get destroyed

In a healthy economy, jobs are constantly being created and eliminated. Labor market fluidity — the level of gross labor market flows — has been on the decline for decades. You might think that a decline in job destruction would be a good thing if fewer people are losing jobs. And during a recession when job creation slows down, you’d be correct.

However, when the economy is expanding, most job separations are people quitting their jobs. Quitting your job is usually a sign that you’ve found a new job. More quitting means firms are poaching workers who already have jobs, and competition for workers ends up boosting wage growth.

Job destruction in the absence of healthy job creation is a dangerous thing. But trying to suppress it could be damaging. A president who takes time to chide each factory closing would not only have little time for the other aspects of his job, but also risks reducing some of the beneficial aspects of creative destruction.

Further reducing fluidity would make the labor market an ossified realm where workers find it difficult to find new jobs and higher wages. Attempts to protect workers, particularly young ones, could instead lock them out of new opportunities. Shaming those that shed jobs could chill job creation.

Reversing the decline in labor market fluidity likely requires taking a macro viewpoint on the labor market and focusing on, say, running a high-pressure economy. A stronger economy would lead to more hiring, more job-to-job movement, and eventually stronger wage growth. Focusing on individual deals and their relatively small impact, instead, seems unlikely to have a significant impact on the labor market.

Nick Bunker is a policy analyst at the Washington Center for Equitable Growth


The Big Idea is Vox’s home for smart, often scholarly excursions into the most important issues and ideas in politics, science, and culture — typically written by outside contributors. If you have an idea for a piece, pitch us at thebigidea@vox.com