Perhaps the most consequential change has occurred in the labor market. For many years policymakers and employers have been operating with a substantial reserve army of the unemployed, or partially employed. Which allowed for stimulative policies designed to provide jobs for those actively seeking them, and as an incentive for others to come off the couch and resume the search in the hope that the skills they once possessed have not atrophied or become irrelevant. With the unemployment rate reported yesterday to be at its lowest level in a decade, the baby-boom generation retiring in large numbers, many the victims of opioid or heroin addictions, all the talk among businessmen I meet is of shortages of skilled labor. Auto dealers can’t find enough auto mechanics capable of handling complicated diagnostic equipment; builders tell me that a shortage of skilled workmen is constraining the number of homes being built; hospitals complain of a severe shortage of nurses and the teachers to train them. This means that an infrastructure program cannot increase the number of jobs, or the economic growth rate. Unless the output of the existing workforce increases — productivity rises, in the jargon of my trade. Which it isn’t, for reasons most analysts cannot explain.
