posted April 10, 2011
Oped #6-The March Jobless Numbers–A Contrarian View

On Friday, April 1, the U.S. Labor Department released its numbers for jobs and unemployment for the month of March. It reported 216,000 net new jobs created in March, after 192,000 the previous month. The two months are heralded as a definite shift in the labor market and jobs in the U.S. Business pundits at the New York Times declared the results represent “a solid� record in job gains, “kicking (job creation) into high gear�. Obama and the administration are calling it clear evidence of a new momentum in job creation, bragging that about 1.3 million jobs were created in the past 14 months since January 2010. However, a closer look at the numbers reveals that continuing, and emerging, problems in the jobs market in the U.S. should be of great concern.

About 658,000 jobs were created in the past three months, since the beginning of 2011, according to the Labor Dept. But the same data show 798,000 workers left the labor force over the same period. In other words, more are giving up finding a job than are locating one. The number is even worse when the past 14 months are considered. 1,353,000 found jobs but 2,121,000 left the labor force. A jobs market truly recovering does not experience that kind of a massive number of discouraged workers leaving the labor force. Quite the opposite. A truly recovering labor market is characterized by large numbers of discouraged re-entering the labor force. Something else is going on here.

A closer look at the 1.3 million shows further interesting characteristics. First, more than 400,000 of the 1.3 million represent growth in involuntary part time and temp agency jobs, about 297,000 temp jobs and 117,000 part time jobs. These are jobs that pay 60%-70% of normal wages and virtually no benefits. Moreover, the 297,000 temp jobs reflect only temp agency hires; at minimum another 150,000 of the 1.3 million are temp workers directly hired by companies themselves. In other words, almost half of the 1.3 million are low pay, no benefit temp and part time jobs.

Another notable characteristic is that the 1.3 million private sector jobs created the past 14 months reflect a delayed recovery from the ‘double dip’ in the job market that occurred last summer. From June to September the economy lost hundreds of thousands of jobs during the four months. The jobs gains since October represents a recouping of those jobs lost last summer, not a true net gain.

A breakdown view of the job growth by major sectors of the economy—Manufacturing, Construction, Government, and the Service Sector—reveals another interesting fact. That is, only the Service Sector has clearly generated job creation to any significant extent. Manufacturing created a net growth of employment of only 110,000 over the past 14 months. Construction has experienced a net loss of –122,000, essentially offsetting the manufacturing growth. While the manufacturing sector experienced a small boomlet in production last year driven by exports, and produced significant profits for its companies and their investors, this boomlet has produced little in terms of employment gains. Manufacturing today only represents 7% of the entire US labor force, after decades of offshoring and outsourcing. Manufacturing may contribute significantly to total output and GDP in the US in a recovery, but it will never lead a jobs recovery from recession.

Construction today is even in worse condition. It is mired in a bona fide depression, on a par with the 1930s. New construction and housing starts are down 75% from pre-recession highs. Foreclosures are approaching 10 million (out of about 54 million mortgages). And home prices are now in their own ‘double dip’ as well. 89,000 of the 122,000 job loss in construction over the past 14 months have occurred in the past three months.

Government job creation is no better. It declined by –313,000 in the last 14 months, with 93,000 of that total occurring in just the last three months. And that’s only the beginning. With States and cities planning major layoffs at mid-year and beyond, job losses totaling 500,000 this year in government are not out of the question.

Only the Service sector has actually added private sector jobs to any extent over the past 14 months and since the start of 2011. Of that sector’s 1,386,000 jobs created, however, many have occurred in the retail, hospitality-leisure and business services industries; that is, in industries that consist overwhelmingly of part time and temp jobs. The previously noted 500,000 plus part-time and temp jobs have undoubtedly been largely concentrated in this sector.

At the rate of 192,000 and 216,000 jobs created the past two months, assuming 130,000 new entrants into the labor force each month we have only a net gain of 70,000 jobs a month. At that rate, the economy will not return to its pre-recession total employment level of December 2007 for another 70.2 months. That’s not until the end of 2016. And that’s using the Labor Department’s conservative U-3 unemployment rate. Using the Labor Department’s more accurate U-6 unemployment rate, a recovery to December 2007 pre-recession job levels will not occur for 188.8 months; that’s 15.6 years, or not until around 2025.

A more accurate picture of a jobs market still deep in trouble is possible by other job market indicators as well. For example, there’s what is called the ‘JOLT’ measure, or job openings to labor terminations ratio. This simply compares the number of workers looking for jobs, given the number of job openings by business. Today there are five workers looking, for every job offered by business. That 5 to 1 ratio is essentially unchanged since January 2010. At the start of the recession it was 1.8 to 1.

Yet another alternative measure of the condition of the job market is the ‘Employment-Population Ratio’. This reflects how well jobs are being created in relation to the growth of the population. That ratio too is unchanged the past fourteen months, from 58.4 to 58.5 today.

How many workers are ‘long term unemployed’ is still another measure. There, once again, not much has changed. There were 6,133,000 long term (i.e. more than 27 weeks jobless) fourteen months ago; there are 6,122,000 today. Meanwhile, the share of long term unemployed as a percent of total unemployed continues to grow, now more than 45%.

Future job creation prospects for the remainder of 2011 and into 2012 are not as great as optimists in the Obama administration and the business press would have us believe. The current US picture is not one of broad based, robust jobs growth. Manufacturing and construction—i.e. sectors that historically lead a recovery from a recession—show no evidence as serving as engines of continued job growth. And the government sector shows an accelerating rate of job loss, soon to approach a half million. That leaves only the Services sector, composed heavily of temp and part time job creation.

Even the modest growth in U.S. manufacturing employment shows signs of now tailing off. Manufacturing has been driven up to now by exports. However, the sources of recent U.S. export sales are now slowing. China and Brazil are both slowing their economies to deal with inflation. Japan has re-entered recession, even before the Tsunami-Nuclear crisis which will reduce its consumption of U.S. exports still further. And Europe continues to teeter on financial instability. Add to that the continuing crisis in the middle east-north Africa, the further rise in oil and commodity goods prices, and it all collectively adds up to a significant decline in global export demand and in turn US export sales, US manufacturing output, and jobs. Manufacturing will thus provide no significant source for job creation going forward.

In even worse condition, the prospect of construction jobs show no light at the end of the tunnel. Jobs in this sector will decline further as it continues to falter once again and foreclosures rise while home prices fall. Congress’s and the Obama administration’s apparent consensus to dismantle the housing agencies, Fannie Mae and Freddie Mac, will mean even less housing construction, sales, and more falling prices.

Finally, in addition to the minimum of 500,000 more jobs soon to be lost in the government sector in 2011-2012, it is estimated that 600,000 additional jobs will disappear in the private sector as well should Congress pass in the next few weeks the Tea Party-Republican $61 billion of cuts in this year’s U.S. budget. And this precedes the even bigger 2012 budget fight about to begin in Washington after April 8, bringing unknown further budget cuts before the end of 2011. In short, even the uneven, tepid, and largely low pay job creation in the services sector the past 14 months will be more than offset in the coming months as a result of forthcoming fiscal austerity and budget reductions by government at all levels.

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