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ECONOMIC ANALYSIS: Researching riddles from the labor market

December 11, 2006

When you work as a researcher at a large university, you've got plenty of company. I may not fully appreciate every nuance of the specialized research being done by the broad spectrum of professors and scientists I work with, but all of us share a common understanding of the research process, and what it takes to be successful. We slave over data sets, keep an ever-alert eye for funding and support, and try to get others excited about our findings.

But when researchers step outside the ivy-covered halls of academia, they frequently face a different kind of audience. It's not just skepticism about research results-refusing to believe findings that aren't convincingly demonstrated-that's the issue. Rather, it is skepticism about the entire research process that produces resistance or even a full-scale counterattack. Results are lampooned as esoteric, obvious or, worst of all, propaganda.

Fortunately-or perhaps not, depending on your point of view-research continues unabated, being discussed among researchers and accumulating on library shelves and Web servers around the globe. And every now and then, a small piece of research helps create a product or solve a riddle in the real world, making the case for its value better than mere words can.

In economics research, we're not inventing cold fusion or a cure for the common cold. But we are trying to understand how and why economic events unfold the way they do, with an eye toward making them turn out better. And even some of the most basic research on the economy-such as recording, tabulating and tracking jobs-can reveal some surprisingly deep insights.

As those of us in the forecasting business travel the state to deliver our economic prognostications, we frequently are met with a simple, yet puzzling, question: How can it be said that Indiana employment totals are not keeping up with the pace of job growth elsewhere, when the news is full of reports of expansions and ground-breakings?

A project launched by the U.S. Bureau of Labor Statistics tells us part of the answer. So-called employment dynamics research creates a data set that allows us to better track the flows of people in and out of the labor force, as well as from job to job. One of its most stunning insights is the revelation of just how turbulent the U.S. labor market is.

For example, in the final three months of 2004, the U.S. economy created about 869,000 net new jobs. Job growth data have been collected and monitored by economists and policymakers for decades, and make up one of our most basic indicators of economic performance. But what about the job churn?

Through better linking of data sets and tracking of individual wage records, we now know those 869,000 new jobs came about as a result of 8.1 million jobs being added at the same time another 7.2 million jobs were vacated or eliminated.

And there was nothing unusual about those three months. Employment dynamics data tell us that the job creation and elimination occur throughout the year, in both good economic times and bad, at a pace that dwarfs net job creation.

The image of the Indiana economy this research conjures up is not one of a solid building, rising from the ground brick by brick. It's a bit more like a boiling cauldron, shifting and mixing before our eyes. Changes elsewhere in the economy that escape notice can easily offset-or add to-individual job-growth stories making headlines.

And we can thank a researcher somewhere for figuring that out.



Barkey is an economist and director of economic and policy study at the College of Business, Ball State University. His column appears weekly. He can be reached by e-mail at pbarkey@ibj.com.
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