I think the thing to be explained is how there can be net job creation but a decrease in GDP. If we figure the people who dropped out of the work force the most during COVID were the very young due to lower attachment (no kids, maybe still living with parents anyway) or those who didn't even have a job yet (college grads) while more expe…
I think the thing to be explained is how there can be net job creation but a decrease in GDP. If we figure the people who dropped out of the work force the most during COVID were the very young due to lower attachment (no kids, maybe still living with parents anyway) or those who didn't even have a job yet (college grads) while more experienced workers stayed in more frequently, that would artificially boost productivity per worker, as the bottom end of the distribution tended to be the ones out of work. (Marginal workers would also be more likely to get laid off, or not bother looking for another job while other payments were coming in, etc.) So for the past two years the average productivity could be higher than expected, because the lower productivity workers were out of the market.
Now those lower productivity workers are coming back in at a higher than normal rate, while old people are retiring at the same rate. Average observed productivity drops as a result. Toss in the increasing desperation for workers to do things related to micromanaging inventories to work around supply shortages and the like, and you might see a few percentage drop in productivity such that it shows up in GDP moving in a different direction than employment.
I think the thing to be explained is how there can be net job creation but a decrease in GDP. If we figure the people who dropped out of the work force the most during COVID were the very young due to lower attachment (no kids, maybe still living with parents anyway) or those who didn't even have a job yet (college grads) while more experienced workers stayed in more frequently, that would artificially boost productivity per worker, as the bottom end of the distribution tended to be the ones out of work. (Marginal workers would also be more likely to get laid off, or not bother looking for another job while other payments were coming in, etc.) So for the past two years the average productivity could be higher than expected, because the lower productivity workers were out of the market.
Now those lower productivity workers are coming back in at a higher than normal rate, while old people are retiring at the same rate. Average observed productivity drops as a result. Toss in the increasing desperation for workers to do things related to micromanaging inventories to work around supply shortages and the like, and you might see a few percentage drop in productivity such that it shows up in GDP moving in a different direction than employment.