Thursday, December 31, 2009

"Jobless Recovery": Your Interpretation...and Mine

Yesterday I told you about an NPR radio show, where comments were made about the "jobless recovery." Three observations were shared, along with the traditional, conventional interpretations, which I shared with you. I asked you to examine the statements and asked you to come up with some of your own.

Here are the statements and follow up questions:

1. Economists are reporting positive indications of an improving economy, while unemployment statistics are still grim, leading to the term "jobless recovery". If the economy is improving, why are few or no jobs being created?

It's expensive to hire someone new. Did you know that it costs an employer 38% over and above an employee's salary to provide benefits? That's expensive. Companies don't want to commit that kind of money when they don't have to. Unemployment insurance is becoming more expensive. That's another cost. And for many employers, there are additional headaches that come with bringing on new employees. Once an employer has hired someone new, it becomes difficult to let that person go -- legally and financially. These are just some of the disincentives for additional hiring. But there is another reason.

According to an article in the Chicago Tribune, this country has lost 1/3 of its manufacturing jobs since the year 2000. Those jobs have moved offshore -- and they are not coming back.

The good news is that there is plenty of work that needs to be done: it's just getting packaged up differently. Fewer jobs, plenty of work. Why? Because jobs are devolving into projects. There has been an astronomical rise in the amount of project-based work that's available in the marketplace, upwards of 50% of work available.

The good news is that jobs, which we measure, aren't being created, but projects are. Let's start taking stock of project-based work. In America, work has always meant having a job. Maybe we need to start thinking differently about work in this country.

2. While some people are getting jobs, the long-term unemployed (defined as being unemployed over 6 months) are having the toughest time finding jobs.

My take? Because the jobs -- and specifically, the types of jobs -- we are losing are not coming back. Those factory line jobs, from Detroit to Dubuque, are not coming back and those who lost their jobs 2 years ago are still not able to find part-time or project-based manufacturing work. When the green jobs movement gets traction, this statistic will change as folks get retrained.

3. Statistics point to a surge in temporary hiring, and that this surge is used as an early indicator for rising employment.

Conventional wisdom says that a surge in temporary hiring is a predictor for the creation of new jobs as employers take on new workers on a trial basis, with the intention of moving them to full-time if they "prove out." I disagree. I just don't see the incentive for companies, big or small, Fortune 500 to mom-and-pop, to hire full-time workers in packages called jobs. Why should they create jobs when it is so easy to to hire "just-in-time-workers" on a temporary basis?
This surge in temporary employment is consonant with the rise in project-based work.

Your thoughts?

Wednesday, December 30, 2009

"Jobless Recovery": Traditional Interpretations

It’s almost 2010…what’s ahead?

Last night, as I was driving along a country road, I listened to a program on NPR. They were talking about the “jobless recovery.”

What is a “jobless recovery”? It seems to be a situation where the economic indicators are improving, while unemployment numbers remain unchanged, or worse, on the rise.

There were 3 statements that I would like for you to consider:

According to the guest, there seems to be a dichotomy between the economists, who measure the state of the economy by looking at certain metrics, and politicians, who tend to evaluate it based on what they hear from their constituents, many of whom are still unemployed. Economists look at traditional statistical data such as: the GDP (gross domestic product, the dollar value of all goods and services produced in the US in a year), CPI (consumer price index, tracking the prices of certain products, housing starts, the stock market, and tell us that things are improving. Politicians tell us that many of their constituents are still unemployed. (In fact, we've lost 11 million jobs during this recessionary time.) That's why we have the term "jobless recovery."

Seems like a contradictory term to me. Why is that? Why are there no jobs or few jobs being created while the economy is showing signs of recovery? Why are economists seeing one thing and politicians another? Why the difference?

The second fact reported was that while some people are getting jobs, the long-term unemployed (defined as being unemployed over 6 months) are having the toughest time finding jobs. This may seem obvious as the longer one is unemployed, conventional wisdom has it, the more difficult it becomes, and there are some people in the job market who are simply "unemployable." But, this time around, this group is having an even more difficult time, than the long time unemployed during other recessions.

Again, my question to you: why are those people in the longest unemployed group having the most difficult time ever finding jobs, and more difficult than ever before?

Finally, the third point: statistics point to a surge in temporary hiring, and that this surge is used as an early indicator for rising employment.

My question is: what is the meaning of a surge in temporary hiring? Is it predictive? Is it good news, or not?

I wanted to pose these questions to you in an effort to get you to think about the employment situation and unemployment statistics. I have given you three sets of facts to consider. What is the "correct" interpretation of these facts?

The current interpretations are mostly based on conventional wisdom, and looking at the data through a traditional lens. I will share these with you tomorrow. In the meantime, I would like to encourage you to think it through for yourself. Developed critical thinking is one of the two most important skills for the next decade. Practice this ability and create your own interpretation.

And, I'll be back tomorrow... :o)