Why does this need any reconciliation? That's working as expected: when productivity improves in some sectors, we don't need as much labour there as before, and thus it needs to be shuffled around. This can have all kinds of knock-on effects.
As long as central bank is doing at least a halfway competent job, overall unemployment will stay low and stable. Ideally, you have people quit for a new job instead of getting fired, but in the grand scheme of things it doesn't make too much of a difference, as long as in aggregate they find new jobs.
An interesting example is furnished by the US between early 2006 and late 2007: hundreds of thousand people left employment in construction, and during that same period, the overall US unemployment rate stayed remarkably flat (hovering around 4.5% to 4.7%). The US economy was robust enough to handle a housing construction bust.
(Of course, after this was all done and dusted, some people declared that house prices were too high and the public demanded that they be brought down. So obligingly in 20008 the Fed engineered a recession that accomplished exactly that..)
> As long as central bank is doing at least a halfway competent job, overall unemployment will stay low and stable. Ideally, you have people quit for a new job instead of getting fired, but in the grand scheme of things it doesn't make too much of a difference, as long as in aggregate they find new jobs.
Two big ifs: the central bank is competent and enough and people find new jobs.
Don't get me wrong: I am for progress and technological innovation. That's why we're working, to make our lives easier. But progress needs to be balanced, so that the changes it brings are properly absorbed by society.
> Two big ifs: the central bank is competent and enough and people find new jobs.
That's only one 'if'. Well, the second 'people finding jobs' is a given if you have a half-way competent central bank and a regulations even slightly less insane than South Africa's.
But let's worry about technological unemployment once we actually see it. So far it has been elusive. (Even in South Africa, it's not technology but their own boneheaded policies that drive the sky high unemployment. They ain't technically more advanced than the rest of the world.)
How do you know we're not seeing technological unemployment? There have been quite a few layoffs, some of them attributed directly or indirectly to "AI".
Second, there are far fewer junior jobs in software development, again attributed to the advance of AI.
> As long as central bank is doing at least a halfway competent job, overall unemployment will stay low and stable.
That’s... not at all a valid generalization. There’s all kinds of things that other actors can do to throw things too out of whack for the the monetary policies tools typically available to central banks to be sufficient to keep things sailing nicely. One big danger here is bad action (or inaction in the face of exogenous crisis) by the main body of the government itself.
You'd think so, yes. But outside of wars, recessions caused by 'real' factors are surprisingly rare. They are almost all caused by central bank 'nominal' incompetence. (I'm using 'nominal' and 'real' here in the sense of 'to do with the number of zeros on your banknotes' vs 'actual goods and services and other real stuff in the economy'.)
One rare counter-example was perhaps Covid, where we had a real issue cause a recession.
That's not to say that real issues don't cause problems. Far from it! They just don't cause a recession, if the central bank is alert. The prototypical example is perhaps the UK economy after the Brexit referendum in 2016:
The leave vote winning was a shock to the British economy, but the Bank of England wisely let the Pound exchange rate take the hit, instead of tanking the economy trying to defend the exchange rate. As a result, British GDP (as eg measured in Euro) immediately shrank by a few percent and the expected path of future real GDP also shrank; but crucially: there was no recession nor its associated surge in unemployment.
For another example have a look at Russia in the last few years. Thanks to the very competent hands of Elvira Nabiullina at the Bank of Russia, the Russian economy has perhaps been creaking under the strain of war and sanctions but has not slid into recession.
Summary: real issue cause problems for the economy, but they don't have to cause a recession, if the central bank is alert. (That's in economies with a central bank. Central banks are actually more of an arsonist than a fire fighter here.)
