The Economy Creates and Destroys Jobs Every Year
There's no specific, reliable number for the jobs that Mitt Romney supposedly destroyed and created during his tenure at Bain Capital, the private equity firm that he headed between 1984 and 1998. But one thing is sure-whatever jobs were lost in companies acquired by Bain, or shut down in a few cases, they were a tiny fraction of job destruction and creation in the American economy as a whole.
Most people don't know that the economy destroys and creates millions of jobs every year. A monthly survey by the Bureau of Labor Statistics captures the details. Called the Job Openings and Labor Turnover Survey, it tracks the numbers of workers leaving and entering jobs.
In 2010, the latest full year available, employers made over 47 million hires, and there were over 46 million job separations. Of the latter, there were 21.3 million voluntary departures (quits), and 21.2 million separations.
This happened in a labor force of 154 million. As 2010 illustrated, about 30 percent of all jobs turn over in a year, and the labor market in the United States is in a constant state of flux. That's one of the strengths of the American economy, although those separated involuntarily might not see it that way.
Hires typically exceed separations, except during recessions. On January 10 the Labor Department published data for November 2011. The number of job openings was 3.2 million, little changed over the year. There were 4.1 million hires and 4 million separations, and the national unemployment rate edged down, to 8.7 percent.
Despite that high rate of unemployment, and with jobs hard to come by for many seekers, there were more quits than layoffs. About 2 million people quit in November, compared to 1.7 million who were terminated.
During recessions and often beyond, separations exceed hiring. Even though the most recent recession ended in June 2009, according to the National Bureau of Economic Research, separations exceeded hiring for a two-year period, February 2008 to February 2010.
In non-recession years, separations and hiring numbers have moved in parallel and have not been far apart since the Labor Department began compiling these numbers in 2000. Between 2000 and 2007, they ranged from 4.5 million to 5.5 million a month. During the recession, these metrics fell to 3.5 million a month. They have recently rebounded to 4 million, one of several signs that the employment situation has been gaining strength.
Industries with the highest rates of hires and separations rates in November 2011 were construction, which is still shrinking, and leisure and hospitality and professional and business services, which are growing. These industries experienced more workers coming and going than did most other industries.
Voluntary separations, or quits, were highest for leisure and hospitality and professional and business services. Quit rates indicate workers' confidence in finding a new job -- one that is similar to or better than the old one, or their desire for personal reasons to leave their job or the labor force entirely.
Quit rates were lowest in government and manufacturing, which is typical. People go into government often for job stability, and into manufacturing because it typically pays better.
Employment in manufacturing declined substantially from over 17 million in 2001 to under 12 million in 2011. Manufacturing, because it tends to be unionized, traditionally has had among the lowest rates of turnover. Workers are paid above-average wages, have excellent benefits, and lose vesting in pension plans if they leave.
Private equity firms such as Bain can, after a takeover, reposition an individual firm by infusing new financing so that it grows faster. As a result, some firms might lose or gain workers. Some even might fail.
But the vast majority of businesses prosper or fail without being taken over. They respond not only to market pressures and opportunities in the United States, but also to worldwide trade and trends.
In recent decades, all too many American firms failed as a result of excessive federal regulations. Some regulations have forced companies to go abroad. Over the past five years, multinationals have created more jobs outside the United States than inside.
Mitt Romney's Republican opponents have hammered him for Bain acquisitions that failed. How many failed is irrelevant to Mr. Romney's qualifications to become president. The right question is, does he understand how to create an environment for U.S. economic growth, where new hires will be greater than job separations?