During the 1970s and 1980s the American economy was remarkably successful in creating jobs for new entrants to the workforce, entrants whose numbers were exceptionally high baby boomers were coming of age, females were leaving the home to work, and immigration had grown. This increase in U.S. employment is particularly impressive when contrasted with the minimal employment growth that characterized Europe during this period. This strong growth in employment was complemented by a good performance on the unemployment front: With the exception of the recessions of the early 1980s and early 1990s, unemployment in the United States, in sharp contrast to Europe, remained at reasonable levels, between 5 and 6 percent. But this relationship between employment growth and unemployment performance need not necessarily hold. On a per capita basis Canada during this period was even more successful than the United States in creating jobs, but nonetheless experienced a growing unemployment rate. One purpose of this chapter is to explain why employment creation and the unemployment rate are not as closely related as might be expected.
Unemployment is implicitly if not explicitly a major topic of several later chapters, most notably chapter 4 explaining how government spending policy affects employment, and chapter 12 in which the infamous trade-off between inflation and unemployment is discussed. The content of these later chapters will be enhanced by the perspective on unemployment provided by the current chapter.
