Friday, January 8, 2010

First Friday -- Unemployment Numbers

Hot off the press...

According to MSNBC: Economy Sheds More Jobs Than Expected
Nation lost 85,000 jobs in December; unemployment rate flat at 10 percent

Let's talk about what this means, find our own interpretation, and challenge the explanations of the "experts." Certainly, it doesn't look good when we "lost" 85,000 jobs in December. Traditionally, the holiday season has been a great time for seasonal hiring in retail, which usually creates a kind of spike in "job creation." But, we lost jobs. So, what does it all mean?

"The economy lost more jobs than expected in December while the unemployment rate held steady at 10 percent, as a sluggish economic recovery has yet to revive hiring among the nation's employers. "

The question is: why did the economy "lose" more jobs than expected in December when the economic indicators point to improving conditions? No one seems to know. That's why experts have coined the term "jobless recovery." As you know from what I've written before, I believe that we "lost" more jobs because not only are jobs disappearing, but because the whole concept of a job, as a way to package up work, a form of work, is disappearing. Jobs are devolving, unraveling, into project-based work.

Next, we read that "the unemployment rate held steady at 10 percent...followed by the explanation that "a sluggish economic recovery has yet to revive hiring among nation's employers." The assumption is that along with an economic recovery comes an increase in job creation. That makes sense. Economic conditions improve, businesses get more orders, need to hire more people to fulfill the orders to make the products, and so begin to start hiring again.

Except that we don’t really make a lot of things any more. We have moved away from predominantly a manufacturing-based economy to service-oriented economy. We continue to offshore our manufacturing jobs, and, in fact, have lost one-third of this country’s manufacturing jobs since the year 2000. That’s incredible. These jobs are not coming back, no matter how great the economy gets.

We need to watch the tendency to interpret data through a traditional lens, trying to make sense of data points as though they were static, without taking into account the shifting social and economic landscape swirling around us. We need to look at economic indicators within the context of change. Statisticians have a propensity and preference for benchmarking data points against markers from the past, called past predictors, but this method doesn’t work in a dynamic marketplace where the past is no predictor of the future.

Why aren't jobs being created? Let’s suppose that even within a service economy, there is plenty of work that needs to be done...but it's not getting packaged up in terms of jobs. There are large disincentives for employers to create new jobs, the largest of which is cost. It's expensive to create jobs. Typically, it costs an employer 38% above a new hire’s salary just to provide benefits, most of which is health care cost. And, that number doesn’t take into account the rising costs of unemployment and other types of insurance.

Bottom-line: employers are not in the position to create jobs. It's too dang expensive. It’s easier to hire temp workers. And, that’s not necessarily a bad thing.

The Labor Department said Friday that employers cut 85,000 jobs last month, worse than the 8,000 drop analysts expected."

Why are employers continuing to cut jobs? One reason is that business credit continues to be tight, despite what you hear from Washington.

Banks aren't lending, and even if they want to lend, they are being prevented from doing so by overzealous regulators who have been given orders rigidly to enforce existing rules and procedures, a kind of over-reaction to lax regulation of the past, and without taking into consideration the exigencies of the present. While this may sound good because we need strong enforcement of existing regulation, it's not. What this means is that banks cannot be flexible with their customers and are foreclosing on customers who have just hit a "tight corner" on liquidity and need some flexibility. More on this tomorrow...

Against this credit backdrop, to prevent bankruptcy and cash flow problems, companies are being forced to cut expenses, drastically, just to stay alive. One strategy is to cut back on employees' hours. The average American work week has been reduced to something like 33 hours. If more severe measures are needed, employers are being forced to cut jobs, which usually include benefit packages costing 38% over salary costs. Wouldn't you eliminate a job and hire a part-time person, at a lower cost and with no benefits, in order to keep your company afloat?

"A sharp drop in the labor force, a sign more of the jobless are giving up on their search for work, kept the unemployment rate at the same rate as in November. Once people stop looking for jobs, they are no longer counted among the unemployed. "

Gee, this is interesting. Most people I know don't just "give up" in their search for work. They are unable to find work, usually because they can't find jobs that were similar to the ones they left. This is true for two categories of workers: 1) skilled manufacturing jobs, people who worked on a manufacturing line that moved offshore. These jobs aren't coming back and until we start getting the "green" jobs funded -- solar energy, natural gas exploration and "green" construction, there won't be much employment, and even then, these jobs will be limited. 2) Middle level management, white collar workers whose jobs either have been eliminated permanently as companies go leaner in their management structure, or whose jobs have been replaced by skilled workers overseas in Dublin, Mumbai and Singapore. These people are in a bind as they are overqualified for the jobs that are being created -- at Taco Bell, Wal-mart and Chucky Cheese. It's no wonder that they appear to "drop out" of the job market.

Despite the dire picture…it’s not all bad news. It’s just gonna look a whole lot different from before. Keep reading to find out how to uncover opportunities today...

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