Job Creation

http://www.nytimes.com/2010/07/03/business/economy/03jobs.html?emc=eta1

http://articles.moneycentral.msn.com/Investing/JubaksJournal/biggest-problem-now-job-creation.aspx

http://www.nytimes.com/2010/07/02/business/economy/02manufacturing.html?emc=eta1

We've been waiting for the jobs numbers and they came out yesterday. Economists estimated (and, that's a mistake right there) that the "OVERALL" numbers of new jobs would be down net because the census jobs were ending: the U.S. lost 125,000 jobs in June. Now, with the appropriate political excuses, the real net jobs number is 83,000 jobs added to the private sector for June. The consensus economist guess was that the number would be 112,000.

Recalling a prior post on Paul Krugman's estimates, the U.S. economy would have to create 300,000 plus jobs per month for 5 consecutive years to make up for the jobs that have been lost since the recession began. This assumed roughly 120/150,000 jobs per month simply to cover new entrants to the workforce coming on each month and then the net difference to 300,000 would be new jobs for those who were not employed. So, by that measure, the new data is pathetic.

There are some bright spots overall: in the first six months of 2009, the U.S. lost 3.7 million private sector jobs; during the first six months of this year it gained 590,000. Of those jobs, 136,000 were in manufacturing which is starting to hire back but not at rates consistent with production volumes (they'd prefer to use "temps" where possible until "forced" to go full time). In addition, as Motoko Rich points out in the article attached, many manufacturers invested in automation during the recession and are looking for people with skills to handle that: "The problem, the companies say, is a mismatch between the kind of skilled workers needed and the ranks of the unemployed ... Now they are looking to hire people who can operate sophisticated computerized machinery, follow complex blueprints and demonstrate higher math proficiency than was previously required of the typical assembly line worker ... Makers of innovative products like advanced medical devices and wind turbines are among those growing quickly and looking to hire, and they too need higher skills."

At the college level, there's a very interesting article in the Wall Street Journal this week on those who got bachelor's degrees and stayed in school to get a master's as the financial crisis grew hoping for a better employment market now. Those people are saying that "strategy" didn't work because they aren't getting jobs. They're saying that there are people "ahead" of them who, for example, have master's degrees and 5 years of experience and, if unemployed, would get jobs ahead of them. While sad and true, many of these individual examples don't represent the overall issue that the "strategy" was right but the "timing" of the recession was very much longer than "usual." Someone staying in school to get a master's now might find a better job market in 18 mos. Or, they might get another master's or a PhD.

Jim Jubak has a current look at the staggering numbers that need to be overcome for the employment situation to right itself. Firstly, we don't pay any attention to the monthly "... is it 9.7% or 9.5% unemployment rate?" analysis. The real unemployment rate right now is 16.6%. For some portions of our population it's substantially worse. For the Great Depression, it was 25%.

Jubak points out that the Congressional Budget Office (CBO) projection is that the "unemployment rate" will be down to 8% in two years. If we paid attention to that 8% number, that would be "DOUBLE" what the unemployment rate was in 2,000!

While we don't have any political affiliation, if one looks at the jobs situation from the point of view of the Bush Administration (2,000 thru 2008), 3 million jobs were created during a period when the U.S. population grew by 22 million. Using the nominal number assigned to net population participating in the labor market (May's number was 58.7%), 13 million jobs needed to be created just to keep pace with population growth during that 2,000 thru 2008 period. So, the U.S. went into the recently ended recession about 10 million jobs in the "hole." Then, things got worse. According to the Economic Policy Institute (EPI), the U.S. lost 7.5 million jobs from the "official" start of the recession in December of 2007. In that same period (the institute calculates), because of a growing population, the U.S. needed to add 3 million jobs just to stay even. From the December, 2007 start of the recession, the U.S. has dug itself an additional hole of 10.5 million jobs. Regardless of the "math" and some overlaps in calculating, we'll go with Jubak's estimate that the jobs "hole" is somewhere between 15 and 18 million jobs.

Looking at low or slow economic growth for the foreseeable future (3% GDP), and assuming no "double-dip" recession situation, it's difficult to see where substantial job creation is going to be coming from.

We agree with Jubak that neither fixing the U.S. financial system nor reducing the deficit addresses the job creation problem that existed before this financial crisis occurred. There is no way to "financially engineer" job growth and it doesn't appear that the job creation problem is going away.

Has anybody read "Atlas Shrugged" lately?