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Updated Employment Multipliers for the U.S. Economy

February 04, 2019

Editor’s note: This Economic Policy Institute’s study quantifies the extent to which creating or destroying jobs in manufacturing has large indirect jobs ripple effects as compared to the service sector. Anyone involved in economic policy planning should understand these effects. 

 

[Josh Bivens | January 23, 2019 | Economic Policy Institute]

When it comes to the ripple effects that spread to the rest of the labor market, one lost dollar of economic output or one lost job is not the same as another.

Each industry has backward linkages to economic sectors that provide the materials needed for the industry’s output, and each industry has forward linkages to the economic sectors where the industry’s workers spend their income. Therefore, in addition to the jobs directly supported by an industry, a large number of indirect jobs may also be supported by that industry. The subtraction (or addition) of jobs and output in industries with strong backward and forward linkages to other economic sectors can cause large ripple effects.

This brief calculates employment multipliers by industry to illustrate the importance of these linkages, updating earlier work by Bivens (2003) and Baker and Lee (1993). Employment multipliers measure how the creation or destruction of output or employment in a particular industry translates into wider employment changes throughout the economy.

 

Read the rest of the article at the Economic Policy Institute web site


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