http://www.economist.com/node/18560195
***************
"You have to think about big things while you are doing small things, so all the small things go in the right direction." (Alvin Toffler)
***************
So, as we end the semester with Fareed Zakaria's continuing homage to China growth and how the rest of us need to make way for it, "The Economist" comes up with "BRIC Wall" as part of its "Economics focus" section. As even Zakaria has said, anything multiplied by 1.3 billion (China's rounded population number) produces a big number. Ergo, China's GDP in dollars is already number 2 in the world, having passed Japan recently. As Japan has had a rough last 20 years, China's "accomplishment" may say as much about Japan's slide as it does about China's growth.
For anyone who has seen the pictures of China's "Empty Cities" or the Australian news video of the South China Mall (aka, the largest mall in the world), China's actual GDP is suspect.
So, along the lines of giving careful counsel about GDP growth, The Economist suggests that the post WW II period has been rich with examples of "blistering catch-up growth" which inevitably slows because gaining ground on the leaders is far easier than overtaking them.
And here's a critical point: developing countries can borrow existing technologies from countries that have already become rich. Advanced economies may be stuck with obsolete infrastructure - does any of this sound familiar?
But, the more an emerging economy resembles the leaders, the harder it is to sustain the pace: "As the stock of borrowable ideas runs low, the developing economy must begin innovating for itself." (Economist again)
OK, so how about numbers? The Economist refers to a new study that looks for the "middle-income trap" that inevitably slows down rapidly growing economies (Barry Eichengreen @ Berkeley and others). That study examined the worldwide economic record since 1957 in attempt to measure potential warning-signs (of growth slow downs). What emerged was a critical threshold: on average, growth slowdowns occur when per-head GDP reaches (around) $16,740 @ PPP (purchasing power parity). As The Economist points out, this estimate passes the smell test of history (see The Economist bar graphs for South Korea, etc.)
Interestingly, a large ratio of workers to dependents reduces the odds of a slowdown. An undervalued exchange rate, on the other hand, appears to contribute to a higher probability of a slowdown.
China's growth puts it on a course to hit the $16,740 GDP-per-head threshold by 2015. Given the Chinese economy's long list of risk factors (an older population, low levels of consumption and a substantially undervalued currency), the study's team puts the odds of a slowdown in China at 70%. That's a high number.
In China's case, rapid development could shift inland, where millions of workers have yet to move into manufacturing, while the coastal cities nurture an ability to innovate (and the study's authors acknowledge this). The IMF forecasts real GDP growth rates for China above 9% through to 2016. That's OK, but China's own new 5 Year Plan has a GDP growth goal that goes something like 8% for 2011 and 7% for the following 4 years, possibly acknowledging a potential slow down. Of course, China has, for the most part, always beaten its GDP growth goals.
More concerning are the generally accepted correlations between GDP growth percentages in China and unemployment: for every 1% drop in GDP growth below 9%, 22 million people become unemployed. That's a number that we have seen no one challenge lately. So, does that mean China's leaders are planning on a growth goal that implies significant unemployment?
Our guess would be that China's (new) leaders plan to beat their GDP goals, as they have in the past, but they may have to do it by infrastructure spending that has no "multiplier" (empty cities or empty malls imply no continuous spending because there is nothing there beyond the structures themselves).
This has the potential negative implication that aligns with George Friedman's (founder of STRATFOR, and author of "The Next 100 Years") perspective: "What happens when China's economy weakens and standards of living decline overall? For the more than 1 billion Chinese living in abject poverty, even a small contraction in living standards can be catastrophic. That is where China is heading in the very near future - toward a relatively small decline in growth, but one that will pyramid economically and socially, generating resistance to the central government."
Friedman continues: "The problem with China is political. China is held together with money, not ideology. When there is an economic downturn, and the money stops rolling in, not only will the banking system spasm, but the entire fabric of Chinese society will shudder. Loyalty in China is either bought or coerced ... a very real future for China in 2020 is an old nightmare - a country divided among competing regional leaders, foreign powers taking advantage of the situation, and a central government trying to hold it all together, but failing."
So, the GDP per capita "stall point" could be a very real early sign that China's economic growth is in more trouble than it might appear to be.
Saturday, April 30, 2011
Friday, April 29, 2011
Wharton On Performance Reviews
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2760&sms_ss=email&at_xt=4db97022df9cee4c%2C0
***************
"A successful man is one who can lay a firm foundation with the bricks others have thrown at him." (David Brinkley)
***************
Performance appraisal is one of my favorite targets! According to the Wharton article attached, a Sibson Consulting SVP estimates that only about 35% to 40% of companies do performance reviews well. Really, how about NONE?
Consultants know what you tell them. How many of those companies actually do verifyable opinion surveys of their employees where the feedback (on whether performance appraisal programs are working well) is real? VERY FEW.
So, the latest influx of employees in the workforce includes a generation of millennials (those born between the late 1970s and early 1990s) who are accustomed to constant and instant feedback. If they want the same from employers, something has to change. Once per year performance appraisal doesn't work anyway and especially doesn't work for this group.
So, what to do. A favorite person I've quoted in the classroom and who is referred to in the Wharton article is Samuel Culbert. Culbert is a professor in the Anderson School of Management at UCLA. Here's a quote: "They [performance reviews] destroy the trust between the boss and the employee, and cost the company enormous amounts of money in terms of time and wasted effort. The people being reviewed worry about pleasing their boss before they concern themselves with delivering results to the company."
That's accurate.
Culbert suggests a form of performance "preview" which he defines as discussions that take place when there is still time to get good results. I'd say frequent discussions while doing the work that involve boss and subordinate in continuing feedback and adjustment to circumstances as it relates to the overall mission or missions. In that way, there's no formal meeting and feedback is continuing.
360-degree feedback works well at those companies that are dedicated to its use at every management level. It involves individuals being reviewed not just by their bosses, but by their subordinates, peers and, if appropriate, their customers and suppliers. GEICO (now a successful Warren Buffet company) uses 360 at every level. The feedback is intended to be anonymous and the idea is to have more than one evaluator.
We'd talk about "forced rankings" here but there's no point. They are not a realistic alternative in spite of the fact that GE and Jack Welch brag about them. They foster competition instead of cooperation and are useless in the average company.
The SAS case study that's referred to is important. SAS is often mentioned in OB texts as a model company from the point of view of good companies to work for. This year and last year, it's been ranked #1 in the "Fortune - 100 Best Companies to Work For." Aside from what they did about performance appraisal (which was probably consistent with their culture - a good thing), the process of performance appraisal training caused them to create a "technical ladder" for promotions for people who had no potential management skills.
In the end, even if there is no formal performance appraisal system, there is an informal one. In those cases, the great companies are using multi-level feedback and evaluation similar to 360 programs - it's just not formal. Most efforts to make a performance appraisal system "formal" fail.
Continuous feedback and supportive teamwork are the most important thing. Formal performance appraisal programs are the least important thing.
***************
"A successful man is one who can lay a firm foundation with the bricks others have thrown at him." (David Brinkley)
***************
Performance appraisal is one of my favorite targets! According to the Wharton article attached, a Sibson Consulting SVP estimates that only about 35% to 40% of companies do performance reviews well. Really, how about NONE?
Consultants know what you tell them. How many of those companies actually do verifyable opinion surveys of their employees where the feedback (on whether performance appraisal programs are working well) is real? VERY FEW.
So, the latest influx of employees in the workforce includes a generation of millennials (those born between the late 1970s and early 1990s) who are accustomed to constant and instant feedback. If they want the same from employers, something has to change. Once per year performance appraisal doesn't work anyway and especially doesn't work for this group.
So, what to do. A favorite person I've quoted in the classroom and who is referred to in the Wharton article is Samuel Culbert. Culbert is a professor in the Anderson School of Management at UCLA. Here's a quote: "They [performance reviews] destroy the trust between the boss and the employee, and cost the company enormous amounts of money in terms of time and wasted effort. The people being reviewed worry about pleasing their boss before they concern themselves with delivering results to the company."
That's accurate.
Culbert suggests a form of performance "preview" which he defines as discussions that take place when there is still time to get good results. I'd say frequent discussions while doing the work that involve boss and subordinate in continuing feedback and adjustment to circumstances as it relates to the overall mission or missions. In that way, there's no formal meeting and feedback is continuing.
360-degree feedback works well at those companies that are dedicated to its use at every management level. It involves individuals being reviewed not just by their bosses, but by their subordinates, peers and, if appropriate, their customers and suppliers. GEICO (now a successful Warren Buffet company) uses 360 at every level. The feedback is intended to be anonymous and the idea is to have more than one evaluator.
We'd talk about "forced rankings" here but there's no point. They are not a realistic alternative in spite of the fact that GE and Jack Welch brag about them. They foster competition instead of cooperation and are useless in the average company.
The SAS case study that's referred to is important. SAS is often mentioned in OB texts as a model company from the point of view of good companies to work for. This year and last year, it's been ranked #1 in the "Fortune - 100 Best Companies to Work For." Aside from what they did about performance appraisal (which was probably consistent with their culture - a good thing), the process of performance appraisal training caused them to create a "technical ladder" for promotions for people who had no potential management skills.
In the end, even if there is no formal performance appraisal system, there is an informal one. In those cases, the great companies are using multi-level feedback and evaluation similar to 360 programs - it's just not formal. Most efforts to make a performance appraisal system "formal" fail.
Continuous feedback and supportive teamwork are the most important thing. Formal performance appraisal programs are the least important thing.
Economic Growth @ 1.8%
http://www.nytimes.com/2011/04/29/business/economy/29econ.html?_r=1&nl=todaysheadlines&emc=tha2
***************
"We all live under the same sky but we don't all have the same horizon." (Conrad Adenour)
***************
So, when last we posted, Nassim Taleb (he of the "Black Swans") had volunteered in his Wharton interview that building "robustness" was the key to keeping economies healthy. He went on to say that we're not in a "recovery" now: "We did not have a recovery. What we had was a massive reliance on the printing press for money ... so we are fooling ourselves with the numbers ... [this is] sort of like Madoff style growth."
Today's report in the NY Times that first quarter GDP growth was 1.8% (after 3.1% growth in the fourth quarter of 2010) would seem to fall in line with Taleb's perspective. The Fed's efforts to spend (QE2) and talk positively (Bernanke's press conference this week) are everything that could be done with "monetary policy." Some economists point out that what the Fed can do is prevent deflation (which it has by throwing money at a very bad situation) but it can't create GDP growth where it's not there. The Fed cannot substitute for capital investment that isn't happening from Top 500 companies - reports of all time record cash levels keep coming in which only support the fact that that money isn't being invested back into the economy.
The 2011 payroll tax cut which was intended as a consumer spending stimulus has been completely neutralized by commodity price increases (especially at the gas pump). Crude oil prices are up 32% over the last 3 months.
On the positive side, there has been an early sign of higher capital spending in business: equipment and software purchases have grown for 8 consecutive quarters. However; some of that software purchasing is for programs that substitute for people so it's not all rosy. Private sector additions of 216,000 jobs in March are certainly a positive sign. Anything over 200,000 in a month is a good sign. But, over 300,000 per month would be what's needed.
Goldman Sachs projects 4% GDP growth in the second quarter. That's the most positive news. Why? Because, whatever else you might indict them for, they know how to make money (and where). Hopefully, they're right.
***************
"We all live under the same sky but we don't all have the same horizon." (Conrad Adenour)
***************
So, when last we posted, Nassim Taleb (he of the "Black Swans") had volunteered in his Wharton interview that building "robustness" was the key to keeping economies healthy. He went on to say that we're not in a "recovery" now: "We did not have a recovery. What we had was a massive reliance on the printing press for money ... so we are fooling ourselves with the numbers ... [this is] sort of like Madoff style growth."
Today's report in the NY Times that first quarter GDP growth was 1.8% (after 3.1% growth in the fourth quarter of 2010) would seem to fall in line with Taleb's perspective. The Fed's efforts to spend (QE2) and talk positively (Bernanke's press conference this week) are everything that could be done with "monetary policy." Some economists point out that what the Fed can do is prevent deflation (which it has by throwing money at a very bad situation) but it can't create GDP growth where it's not there. The Fed cannot substitute for capital investment that isn't happening from Top 500 companies - reports of all time record cash levels keep coming in which only support the fact that that money isn't being invested back into the economy.
The 2011 payroll tax cut which was intended as a consumer spending stimulus has been completely neutralized by commodity price increases (especially at the gas pump). Crude oil prices are up 32% over the last 3 months.
On the positive side, there has been an early sign of higher capital spending in business: equipment and software purchases have grown for 8 consecutive quarters. However; some of that software purchasing is for programs that substitute for people so it's not all rosy. Private sector additions of 216,000 jobs in March are certainly a positive sign. Anything over 200,000 in a month is a good sign. But, over 300,000 per month would be what's needed.
Goldman Sachs projects 4% GDP growth in the second quarter. That's the most positive news. Why? Because, whatever else you might indict them for, they know how to make money (and where). Hopefully, they're right.
Friday, April 15, 2011
Living With Black Swans
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2755
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"Big picture thinkers are comfortable with ambiguity. They don't try to force every observation or piece of data into pre-formulated mental cubbyholes." (John C. Maxwell)
***************
Nassim Taleb's April 13 interview at Wharton provides a fresh perspective on his original black swan theory as well as a what he thinks about oil, the economy, the middle east, etc.
It is interesting that Taleb sees himself as having a tough time getting his black swan message across. While Dr. Herring (his interviewer and former teacher) disagrees with Taleb on that (after all, the term "black swan" has become a part of modern business/economic language), Taleb's point is that the true message of the black swan is that there are some environments in which rare events are simply not predictable.
Taleb goes on: "Most people think they can predict the black swan, that with quantitative sophistication they can get answers. They don't get the idea that because we can't predict black swans, then we need to restructure institutions and rethink strategies to be more robust in the face of uncertainty." For Taleb, the real message of black swans is robustness. Build it (robustness) and one will survive black swans.
Taleb doesn't see the events of the Middle East as black swans: maybe "gray swans." These events are possible to anticipate. In his book, he uses Saudi Arabia as a prime case of the calm before the storm and the "Great Moderation" [the perceived end of economic volatility due to the creation of 20th century banking laws] comparably. The fact that Saudi Arabia has kept a lid on any dissent is a prime example of pressure building. Where Italy, for example, has had 60 regime changes since WW II, and nobody takes all of the elegant yelling and screaming seriously, all people in Italy are represented, however disorganized. In Saudi Arabia, between 7 and 15,000 people "own" the country and the class immediately below them (upper middle) resents that. The Saudi situation looks like stability, but it's not: "Once you remove the lid, the thing explodes." So, the same kind of thing happens in finance. Take the portfolio of banks. The environment seemed very placid - the Great Moderation - and then the thing explodes.
So, the idea is not to try to predict the "catalyst" - who could anticipate that a self-immolation in Tunisia would lead to the widespread discontent in North Africa. The "discontent" could be predicted (with 60% of the Arab street under 30 and unemployment rates high), but not the immediate trigger. As Taleb puts it so well with his "bridge" analogy, it can be predicted that a bridge is fragile but it cannot be predicted which truck will break it. So, one looks at the bridge situation in a structural form: what the physicists call the "percolation approach." You study the terrain. You don't study the components. In finance, they study the random walk. Physicists study percolation (everything is dynamic).
And then, as Taleb says, you learn not to try to predict which truck will break the bridge. But, you just look at the bridge and say, "Oh this bridge doesn't have a great foundation. This other one does. And this one needs to be reinforced." So, this goes to finance and the concept of building "robustness." Look for it or build it where we think it's needed.
Turning to the jobless recoveries we seem to have had over the last 10 years, Taleb's position is that we're not in a "recovery" now: "We did not have a recovery. What we had was a massive reliance on the printing press for more money ... So we are fooling ourselves with the numbers ... [this is] sort of like Madoff style growth."
There is much more to this exceptional interview and Taleb's perspectives. Read it and see how much sense it makes to you.
***************
"Big picture thinkers are comfortable with ambiguity. They don't try to force every observation or piece of data into pre-formulated mental cubbyholes." (John C. Maxwell)
***************
Nassim Taleb's April 13 interview at Wharton provides a fresh perspective on his original black swan theory as well as a what he thinks about oil, the economy, the middle east, etc.
It is interesting that Taleb sees himself as having a tough time getting his black swan message across. While Dr. Herring (his interviewer and former teacher) disagrees with Taleb on that (after all, the term "black swan" has become a part of modern business/economic language), Taleb's point is that the true message of the black swan is that there are some environments in which rare events are simply not predictable.
Taleb goes on: "Most people think they can predict the black swan, that with quantitative sophistication they can get answers. They don't get the idea that because we can't predict black swans, then we need to restructure institutions and rethink strategies to be more robust in the face of uncertainty." For Taleb, the real message of black swans is robustness. Build it (robustness) and one will survive black swans.
Taleb doesn't see the events of the Middle East as black swans: maybe "gray swans." These events are possible to anticipate. In his book, he uses Saudi Arabia as a prime case of the calm before the storm and the "Great Moderation" [the perceived end of economic volatility due to the creation of 20th century banking laws] comparably. The fact that Saudi Arabia has kept a lid on any dissent is a prime example of pressure building. Where Italy, for example, has had 60 regime changes since WW II, and nobody takes all of the elegant yelling and screaming seriously, all people in Italy are represented, however disorganized. In Saudi Arabia, between 7 and 15,000 people "own" the country and the class immediately below them (upper middle) resents that. The Saudi situation looks like stability, but it's not: "Once you remove the lid, the thing explodes." So, the same kind of thing happens in finance. Take the portfolio of banks. The environment seemed very placid - the Great Moderation - and then the thing explodes.
So, the idea is not to try to predict the "catalyst" - who could anticipate that a self-immolation in Tunisia would lead to the widespread discontent in North Africa. The "discontent" could be predicted (with 60% of the Arab street under 30 and unemployment rates high), but not the immediate trigger. As Taleb puts it so well with his "bridge" analogy, it can be predicted that a bridge is fragile but it cannot be predicted which truck will break it. So, one looks at the bridge situation in a structural form: what the physicists call the "percolation approach." You study the terrain. You don't study the components. In finance, they study the random walk. Physicists study percolation (everything is dynamic).
And then, as Taleb says, you learn not to try to predict which truck will break the bridge. But, you just look at the bridge and say, "Oh this bridge doesn't have a great foundation. This other one does. And this one needs to be reinforced." So, this goes to finance and the concept of building "robustness." Look for it or build it where we think it's needed.
Turning to the jobless recoveries we seem to have had over the last 10 years, Taleb's position is that we're not in a "recovery" now: "We did not have a recovery. What we had was a massive reliance on the printing press for more money ... So we are fooling ourselves with the numbers ... [this is] sort of like Madoff style growth."
There is much more to this exceptional interview and Taleb's perspectives. Read it and see how much sense it makes to you.
Friday, April 8, 2011
Having Your Cake & Eating It Too
http://dealbook.nytimes.com/2011/04/07/founders-now-take-the-money-and-maintain-control/
***************
"Always believe what a person does, not what he says." (Fred Smith)
***************
One of the reasons why I put a private equity section into my honors international business classes during this school year was that, during the recent worldwide financial crisis, that money went overseas. So, the question became where did it go and when was it coming back?
In the case of the Carlyle Group, it went to China. For David Rubenstein (Carlyle C0-Founder), his perspective was a question: why invest in the U.S. where the regulatory and tax environment is unpredictable when one can invest in China where there is consistent growth in a much more controlled economy? This is a perspective that was shared by many of the (U.S.) Top 500 CEOs who were not rushing to spend their capital money here in America.
If you feel, as I do, that private equity tends to lead (good or bad) into the hot markets, then watching where it goes becomes an economic indicator.
While the folks at JP Morgan Chase would tell us that they're lending again, I'm not sure that, unless your name is Donald Trump, a lot of that has been happening for the person looking to get a mortgage to buy a home or the small business owner. But, cheap corporate debt is back and available to private equity here in the U.S. So, while corporate America still has some of the highest numbers ever for cash-on-hand, private equity is jumping in to markets here.
The fact that money is flowing again, even in one sector of the U.S. market, is a good sign for future spending here. It facilitates founder/owners of next generation Internet and social network companies staying in their CEO positions without going public. That's not just a Facebook story. According to the National Venture Capital Association, 2010 was the start of a comeback with a 19% increase in investments (to $21.8 billion).
This is "having your cake and eating it too." Instead of monetizing your ownership shares by going public and getting more capital to grow, secondary offerings are getting easier to sell and angel investors are looking for places to invest (according to Travis Kalanick in the article we've attached, the boom in angel investing and the popularity of networking services like Angel List, a site that matches entrepreneurs with investors, have made financing significantly more accessible).
All of this smells like a boom leading to a "bubble." One of the good things about this article is the video it includes on what happens if it is a sector bubble. A key difference between what's going on right now and the Dot.com Boom/Bust is that much of the investing is happening on the secondary markets where many of these young companies are still private. So venture capitalists are coming in to spend more money on "good ideas" and keeping the original CEOs in their jobs.
We'll see. Check the graphic for a "fuller picture of the Silicon Valley money network." It's good.
More on the overall economy in the next post.
***************
"Always believe what a person does, not what he says." (Fred Smith)
***************
One of the reasons why I put a private equity section into my honors international business classes during this school year was that, during the recent worldwide financial crisis, that money went overseas. So, the question became where did it go and when was it coming back?
In the case of the Carlyle Group, it went to China. For David Rubenstein (Carlyle C0-Founder), his perspective was a question: why invest in the U.S. where the regulatory and tax environment is unpredictable when one can invest in China where there is consistent growth in a much more controlled economy? This is a perspective that was shared by many of the (U.S.) Top 500 CEOs who were not rushing to spend their capital money here in America.
If you feel, as I do, that private equity tends to lead (good or bad) into the hot markets, then watching where it goes becomes an economic indicator.
While the folks at JP Morgan Chase would tell us that they're lending again, I'm not sure that, unless your name is Donald Trump, a lot of that has been happening for the person looking to get a mortgage to buy a home or the small business owner. But, cheap corporate debt is back and available to private equity here in the U.S. So, while corporate America still has some of the highest numbers ever for cash-on-hand, private equity is jumping in to markets here.
The fact that money is flowing again, even in one sector of the U.S. market, is a good sign for future spending here. It facilitates founder/owners of next generation Internet and social network companies staying in their CEO positions without going public. That's not just a Facebook story. According to the National Venture Capital Association, 2010 was the start of a comeback with a 19% increase in investments (to $21.8 billion).
This is "having your cake and eating it too." Instead of monetizing your ownership shares by going public and getting more capital to grow, secondary offerings are getting easier to sell and angel investors are looking for places to invest (according to Travis Kalanick in the article we've attached, the boom in angel investing and the popularity of networking services like Angel List, a site that matches entrepreneurs with investors, have made financing significantly more accessible).
All of this smells like a boom leading to a "bubble." One of the good things about this article is the video it includes on what happens if it is a sector bubble. A key difference between what's going on right now and the Dot.com Boom/Bust is that much of the investing is happening on the secondary markets where many of these young companies are still private. So venture capitalists are coming in to spend more money on "good ideas" and keeping the original CEOs in their jobs.
We'll see. Check the graphic for a "fuller picture of the Silicon Valley money network." It's good.
More on the overall economy in the next post.
Saturday, April 2, 2011
5 Answers
http://economix.blogs.nytimes.com/2011/04/01/5-answers-from-todays-jobs-report/?emc=eta1
http://www.nytimes.com/2011/04/02/business/economy/02jobs.html?emc=eta1
***************
"Any people anywhere, being inclined and having power, have the right to rise up, and shake off the existing government, and form a new one that suits them better. This is most valuable - a most sacred right - a right, which we hope and believe, is to liberate the world." (Abraham Lincoln from Craig Macaulay)
***************
It's always good to see a jobs report with a net plus of 216,000.
But, as David Leonhardt points out, wages did not grow at all in March and have trailed inflation over the last year. The workweek didn't get any longer and it typically does get longer before a boom in hiring. And, 216,000 is not exactly "blistering:" at that pace, the unemployment rate would not return to 5% for about five more years.
5 Answers:
(1) No, the latest "turmoil" (oil prices, state and local cutbacks) has not spooked employers. Job growth over the last 3 months has averaged 159,000, the highest number since the recession began in late 2007;
(2) Yes, it is possible the Labor Department might be under-counting job growth. According to another Labor Department survey (of households), the economy added 291,000 jobs last month;
(3) Absolutely nothing: the average hourly wage of all employees remained $22.87, unchanged from February and up only 1.7% over last year;
(4) No, existing employees are not working more hours - not a good sign since working more hours each month is an early sign of recoveries.
(5) No, there is no improvement in the numbers for the "underemployed" and the "hard-core unemployed"in March.
March was the 12th consecutive month of private sector job growth and that's a direction we all like but how MANY jobs is it growing? The current labor participation rate is 64.2% of adults either in the workforce or looking for a job - that's the lowest in the last 25 years.
So, better data but I wouldn't plan a parade.
http://www.nytimes.com/2011/04/02/business/economy/02jobs.html?emc=eta1
***************
"Any people anywhere, being inclined and having power, have the right to rise up, and shake off the existing government, and form a new one that suits them better. This is most valuable - a most sacred right - a right, which we hope and believe, is to liberate the world." (Abraham Lincoln from Craig Macaulay)
***************
It's always good to see a jobs report with a net plus of 216,000.
But, as David Leonhardt points out, wages did not grow at all in March and have trailed inflation over the last year. The workweek didn't get any longer and it typically does get longer before a boom in hiring. And, 216,000 is not exactly "blistering:" at that pace, the unemployment rate would not return to 5% for about five more years.
5 Answers:
(1) No, the latest "turmoil" (oil prices, state and local cutbacks) has not spooked employers. Job growth over the last 3 months has averaged 159,000, the highest number since the recession began in late 2007;
(2) Yes, it is possible the Labor Department might be under-counting job growth. According to another Labor Department survey (of households), the economy added 291,000 jobs last month;
(3) Absolutely nothing: the average hourly wage of all employees remained $22.87, unchanged from February and up only 1.7% over last year;
(4) No, existing employees are not working more hours - not a good sign since working more hours each month is an early sign of recoveries.
(5) No, there is no improvement in the numbers for the "underemployed" and the "hard-core unemployed"in March.
March was the 12th consecutive month of private sector job growth and that's a direction we all like but how MANY jobs is it growing? The current labor participation rate is 64.2% of adults either in the workforce or looking for a job - that's the lowest in the last 25 years.
So, better data but I wouldn't plan a parade.
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