EMPLOYMENT REPORT
Remember the old sailing ships movies with the tall ship stuck in the doldrums and the crew all out in the long boats pulling the ship behind them in the tropical heat. Well,
sometimes these employment reports make me feel like one of those crewmen.
Yes, the employment situation has quit deteriorating, and there are encouraging details within the report. But the overall rebound in the economy and the employment situation is one of being stuck in the doldrums.
After the February snowstorms caused monthly hours worked and the index of aggregate hours worked to tick down, this month showed the expected snap back in hours worked. We are now looking at the first quarter hours worked index rising at a 1.8% annual rate, the first quarterly gain since the recession began. With continued strong productivity gains this implies that first quarter real GDP growth is almost certain to exceed consensus expectations.
However, much of the improvement in the hours worked index was offset by a drop in average hours earning.
Consequently, we are seeing a significant gain in average weekly earnings. But it is not enough to generate large gains in real income growth on the positive side, nor is it enough to scare the Fed into premature tightening on the negative side.
One of the encouraging details buried deep within the report is the large improvements in the diffusing index — another leading index of stronger employment. But we have now seen several of these leading indicators be positive for several months. It is time for them to actually lead to some strong employment numbers.
Spencer, To continue your analogy, doea anyone see a front approaching the sailing ship? I see the situation where you are beginning to get some normal on shore wind –weaker than normal at this place in the business cycle but discernable–which permits the vessel to move albeit slowly along the shore, but absolutely no sign that the ship can head out into the open ocean under its own power. In fact the last time I think we had any real wind at our back was in the late 1990’s. While there are some encouraging cyclical signs, I think we face a much more serious structural problem and perhaps we should be having the various policy debates in the context of an economy which cycles around a 20% unemployed, underemployed and discourage worker model. Plainly supply side economics does not work–all that does is make the rich richer and encourages everyone else to overleverage. The Keynesian solution of having government supplement demand gets us that breeze near the shore, but at the cost of unsustainable deficits without any likelihood of changing the general structure of unemployment. We sort of talked about this awhile back with the idea that machines were going to do all the work, so how do we divide resources? I remain hopeful that there will be another big thing like railroads, industrialization, automobiles and personal computers which will change the structural problems, but those sorts of things do not come along every day and it probably makes sense to think about what an economy would look like with a fifth of the working age population underemployed.
not doldrums. more like “in irons.” the result of bad sailing, not any failure of nature.
Glad to see you in the running today spencer. Have a good weekend.
Terry — I like your thinking on this. But it also has problems.
The biggest problem is that it takes a long time for a new industry to become large enough to really pull the old ship along. Look at the IT boom of the 1990s. It created a boom, but there was no follow up in the next cycle. Bart of the problem was that much of the IT demand in the 1990s was from the IT sector itself to provide capital equipment for the IT sector. In addition we had great productivity developments in softwear in the 1990s-2000s so that many of the jobs in the IT industry were automated away. Moreover, it was the good jobs in programming where we quickly taught the computer to do so much of the basic labor inensive jobs that were widespread in the 1990s.
Healthcare is a large enough industry to create a lot of jobs and income growth that can create a sefl-sustaining jobs cycles. But how do we finance it through the private sector?
Energy independence or green industry is another good alternative that shows a lot of promise. But it will be a cery slow period of gaining sufficient scale to have a major economic impact.
I’m sure others have their own ideas.
Terry: “…it probably makes sense to think about what an economy would look like with a fifth of the working age population underemployed.” Just like France????
Of course, we are headed for their HC System which will make up for the pain and agony caused by current economic policies.
Which brings me to your other comment: “Plainly supply side economics does not work…” Let me refer you to Spencer’s first chart.
I think that Obama’s closest advisers looked at green/renewable energy as a possible locomotive for widespread economic growth, but I guess I do not see it for the same point you make about the IT revolution–it is sort of a one and done phenomena. Do not get me wrong, it has permanently added to the economy just as green/renewable energy will, but the manic growth phase of the 90’s did not continue, nor did it produce new growtrh engines for the last decade–at least in terms of putting all labor resources to work at full capacity.
It’s always good to see that some people are trying to come up with solutions to problems that appear to be intractable. Unemployment is the proverbial 800 lbs gorilla sitting atop a variety of other economic problems. If there were more robust employment across the country would be worried about the sceamers plans for Social Security? Would the tax receipts, local, state and federal, be more able to support government programs? Wouldn’t even the cost of health care coverage be dealt with more effectively? All are problems which are subsidiary to a puttering economy which has resulted in poor employment numbers.
That brings us back to the good suggestions being made here, which unfortunately are solutions with only future payoffs. Those payoffs are not a certainty. Is it safe to assume that “green” technology industry will be available without global competition? Are pharmaceuticals immune to import pressures from cheap labor manufacturers? Any new industrial effort is likely to be faced with competition that may leave the US holding only the unemployment bag still. Look to the past if you want to see the future. Listening to a report this AM on NPR regarding the valuation of the Chinese yuan I was struck by a glaringly unanswered question. The report, in interview style, described how products are paid for in one curreny (US $s) and get converted to the local currency (Chinese Ys) etc, etc. It was a bit complicated, but it did provide the details of how money travels about the globe.
What didn’t that report answer? Several times the interviewee made a point of describing how products manufactured in China, in this case, were paid for in US $s. No one asked why all those products couldn’t be manufactured in the US? No one expressed the opinion that the relative values of global currencies would be less of a problem to the US economy if more of those goods were manufactured here. No one addressed the issue of US $s searching the globe for the cheapest source of labor. So now we are faced with the persistent pkroblem of unemployment because all the available jobs have been exported. No one seemed to be of the opinion that there was any value in repatriating manufacturing back to the US. Too bad.
That certainly would be a more direct approach to the problem of unemployment.
Spencer, Terry, and Jack,
The problem with getting the jobs back here is that we have a huge global surplus in unskilled labor. All those widgets we import can (and have) been made in the US. But the making of these widgets oly require unskilled labor (I define any job that can be taught in 1 eight hour day and then only minimally supervised as unskilled – most factory jobs fall under this). Minimally skilled labor is also in over-abundance.
And lets face a fact. People in China, or India, or Thailand etc don’t think that working a 40 hour week in safe pleasent conditions, having a 2000 sq ft home with two cars as the minimum amount to live a middle-class lifestyle. They are good people, but there expectations for what is consider poor or middle class standard of living are way lower than US citizens. Most of our poor (i.e. on welfare way under the poverty line) live what would be consider lower-middle class in India. In India the poor STARVE.
So we are having a global wage arbitrage that is really a global leveling of families living conditions. The US is on top and will level down while the billions of poor start leveling upwards. The economic pie is growing but no-where near fast enough to stop our drop in US/western standards of living. Then add to the fact that we provide the de-facto defense of the western world at heavy cost doesn’t help our position either. Our built up wealth will slow this fall, but once Madrid ruled large parts of the world….
I don’t think tariffs and import bans are the solution either.
Neither is “Green Technology” mostly becuase it doesn’t LOWER the cost of energy, probably the best bet is medical/nano/computer technology synergy that is slowly coming out.
BUt my crystal ball is pretty foggy with our ship stuck in irons…
Islam will change
Buff,
You paint a bleak picture which makes capital the trump card for the foreseeable future. Given that only the capitalists will then have any income available beyond bare necessities, what is our salvation?
I think your description of manufacturing jobs is a little narrow. Heavy machinery and tool and die seem to require greater human input and skill. There are a host of other manufacturing jobs that go beyond throwing the switch and keeping an open eye for a warning light.
Jack – Not many…take a look at building cars for example or rolling steel.
We can’t compete with the 3rd world on jobs that require muscle skills….
And China graduates how many engineers/year?
We live in very interesting times…
Islam will change
“We can’t compete with the 3rd world on jobs that require muscle skills….”
Of course we can compete with the 3rd world for muscle jobjs, and compete in brainy jobs too. But what nobody is acknowledging is that in order to do so we, ie the majority of Americans, will have to adopt 3rd world living standards. What do you think Globalization is all about?
The pending “flat” world we’ll all be living in is meant to be the lowest common denominator, not a utopia.
It sounds to me Buff that you are throwing in the towel and conceding to the rest of the world that America can’t compete and prosper. China has a great many obstacles in place to inhibit imports. But China also encourages its upper class to educate their children. They may only be focused on their elites, but there are so many of them that they represent a major force. Maybe a bit of old fashioned protectionism is required to level the playing field. One sure thing is that if so-called US corporations continue to support the Chinese economy at the expense of the American workers this country will fail its middle class and become a third world economy.
test
>>Yes, the employment situation has quit deteriorating, a
did it really ??? if you believe BLS report… quite possible..
well I live in real world , run real money… situation is quite opposite..
check out daily treasury statement… there’s item called ‘unemployed benefits’
AKA money paid to people who lost jobs..
lets say I believe you, jobs prospects are better.. and businesses stopped cut people..
thus number people who receive ‘unemployed benefits’ must approx. same as compared w/
jan-mar 2009..right ?? thus %growth in paid ‘unemployed benefits’ on y/y basis must be around 0
or even better negative..
lets check out hypothesis..
in mar 2009 US gov paid 10,929 bln $, in mar 2010 US gov paid 16,113 blnn $ ..
thus %growth is 44.8 %… ( BTW ITS ALL TIME monthly RECORD )
lets compare on quarter basis .. jan-mar 2009 and jan -mar 2010
its 28 bln in 2009 and 45 bln in 2010 thus %growth is 60 %…
so either US gov paid same number people 60 % more benefits ( that I highly doubt 🙂 )
or roughly on average 50-60% more people were unemployed in jan-mar 2010
as compared same period in 2009…
well,, its real life, real money analysis..
good luck in ivory towers..
Alex
One of the factors that are continually ignored by far too many people is one that you address in this post. There are jobs that exist solely to eliminate other jobs. Unlike the constantly cited example of the buggy whip maker put out of business by the birth of the auto industry, we now have software companies that create products meant to put other programmers out of work. companies that create automated check out kiosks to put clerks out of work and industrial robots to put factory and warehouse workers out of jobs. These kinds of businesses will never create as many jobs as they displace or their reason for existence vanishes. Yes, we do need to consider how we can adjust to a society where a really significant portion of the population will not have work available to them unless we manufacture jobs somehow. And it can quite possibly get worse than 20% permanent unemployment.
Why good luck?
I don’t know why
hi Buff:
Let me open a can of worms, SS, healthcare, OT laws, minimum wage laws, 401k, Child Labor Laws, OSHA laws, EPA laws, etc. are not wages; they are burden to actual labor input to the product(period). This is your competition point and not actual labor.
Most UAW workers, Tier 1 and 2 workers, most press operators, most machinists, most electronics and electical workers, most assembly workers, etc are not jobs taught in one 8 hour shift. Maybe forklift operators and pickers but otherwise no.
We do not have to level down to their standards and in many cases the countries who signed the WTO made exceptions to the regulations. We need to reconsider and do the same. We may pay more for the prduct; but in the end, we will protect the standard of living.
162,000 jobs – 48,000 temporary Census jobs = 114,000 jobs (along with 40 some thousand temp jobs). The US needs 125,000 jobs just to keep up with new entrants into the job market, so you could say that the report showed that there was a shortage of 11,000 full-time jobs for this report. I guess it’s better than January 2009, but let’s not get too excited about this report. Also, Census hired 600,000 for temp jobs, so they will again be entering the unemployment lines later in the year. US needs to create 400,000 jobs a month for the next two years to put the 8,000,000 that have been laid off this recession back to work. If you count unemployed, underemployed and discouraged workers, you get over 24,000,000 who want full-time work but can’t find it. Put some rose-colored-glasses on that number.
I don’t have an ivory tower, having never bought one…most of the Bears don’t have ivory towers having sold them last decade and having our own businesses and private jobs, if that is what you were referring to as pointy headed elitist professors, but I can vouch that those who are university professors don’t actually have pointy heads either.
Having said that job loss is slowing, but that real job growth is far off that accounts for population growth and the 8 million lost jobs, what more do you want??
“Remember the old sailing ships movies with the tall ship stuck in the doldrums and the crew all out in the long boats pulling the ship behind them in the tropical heat. Well,
sometimes these employment reports make me feel like one of those crewmen.”
Spencer sounds excited?? What planet are you on?
run,
You may be correct and I might be way behind. I just grew up in the rust-belt and saw that most of the jobs my non-farm labor HS grad buddies going into in Akron and Cleveland were at best minimally skilled. I’ll grant you there is lots of skilled jobs in any factory. Maybe it was where I grew up, but less than 30% of my HS grad class went to ANY form of higher education…and all expected a high standard of living.
All those laws you listed do increase the cost of building a product. And the factory owner in India gets to skip all that (or a lot) and only pay $3K/year. And have thousands lining up for a job. How do you bring the widget factory back? Especially when there is no real difference between that guy in India and my friends I graduated from HS with?
On many leftie blogs I see many who admire the European lifestyle and want the US to go that way. Maybe that’s the right direction – a not-to-bad drop in our standard of living in return to avoiding it going all the way to equalize with India. If we do it slowly enough we could probably avoid to much social upheaval (what saved the rust-belt, it was a long slow bleed..).
Islam will change
rdan,
I sold my ivory tower at the height of teh bubble! How’d you do?
🙂