ECONOMIC ANALYSIS: U.S. job growth improves, but Midwest is wallflower

Keywords Economy / Government
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We are a nation of more than 300 million people, over half of whom are in the civilian work force, with almost 146 million having jobs. So why do we get so excited, or disappointed, when the government scorekeepers report each month about job gains of a mere couple of hundred thousand?

Of course, when I say “we,” I mean the tiny group of economists, policymakers and financial analysts who keep track of such things. Most businesspeople, let alone folks off the street, couldn’t tell you what job growth was last

month, or even express an opinion on the number if you gave it to them.

But the spin that talking heads-such as myself, I must admit-put on job growth data does propagate into the general public, and the characterizations we make of the monthly ebbs and flows of the job market do find their way into our collective psyche.

For those of us in the Midwest, employment news from the national economy might seem to be describing another country. For the last several years, the last place you would want to stand to get a read on the national job market would be in front of a window looking out at just about any Great Lakes state.

We’re job growth laggards in this part of the country, pure and simple. Even though no one is tooting horns over the 1.4-percent job growth experienced nationwide in the last 12 months, the sad fact is that no Midwest state has come close to matching even that modest mark. While there are always job growth winners and losers in individual states around the country, the Midwest stands out as the only region of the country with uniformly poor performance.

Yet we should still be paying attention to national job growth, if for no other reason than to keep tabs on how the national economy is performing. For if you think the economic ride in your community is a bit bumpy right now, were the national economy to falter, it would almost certainly be much worse.

Fortunately, there is little reason to expect the U.S. economy to do anything but grow in the months ahead. In particular, the job growth data in the most recent months have been quite encouraging.

For the past year and a half at least, many economists have wondered how much longer employers would be able to squeeze more productivity out of the work force, as the gains in output had greatly exceeded growth in payrolls. If the data from the last half of 2006 are any guide, that day may have arrived. For while overall economic growth has tailed off, down to 2.0 percent for the third quarter of last year, employment growth has, if anything, picked up speed.

In the past six months, the national economy created almost a million net new jobs. Much of that growth escaped headlines, as it represents upward revisions to more anemic growth estimates that were originally estimated. The difference between the rate of job creation and the rate of output growth in the U.S. economy for the last six months is now the lowest it has been for three years.

With job growth catching up to economic growth, the labor market will see some changes. Profits have taken a disproportionate share of income growth in recent years, but with labor markets tightening, we can certainly expect to see more growth in wages in the coming year. And it will be more difficult to wring the same productivity growth out of the economy in the months ahead as well.

Those outcomes might concern the Federal Reserve, but they are welcome news for most households. If we can just get Midwest states like ours to start following the script.

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

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