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Where Is Unemployment Heading?
This article originally appeared in The Daily Capitalist.
The Bureau of Labor Statistics (BLS) came out with a positive employment report for March, 2011, but the growth, while encouraging, is tenuous at best. There are still 13.5 million people unemployed in America.
Here are the headline numbers from Econoday:
The 8.8% unemployment rate is the lowest since March, 2009. Private employment was actually up by 230,000, but the BLS deducts the loss of jobs from the public sector from that amount to get to the 216,000 headline number. The breakdown was as follows (from the BLS report):
Job gains occurred in professional and business services, health care, leisure and hospitality, and mining. Employment in manufacturing continued to trend up.
The number of unemployed persons (13.5 million) and the unemployment rate (8.8 percent) changed little in March. The labor force also was little changed over the month. Since November 2010, the jobless rate has declined by 1.0 percentage point. ...
In March, the civilian labor force participation rate held at 64.2 percent, and the employment-population ratio, at 58.5 percent, changed little.
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in March, at 8.4 million. ... In March, 2.4 million persons were marginally attached to the labor force, up slightly from a year earlier. ... Among the marginally attached, there were 921,000 discouraged workers in March, little changed from a year earlier. ... The remaining 1.5 million persons marginally attached to the labor force in March had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities. ...
Where are the job gains coming from? (from the BLS):
In March, employment in the service-providing sector continued to expand, led by a gain of 78,000 in professional and business services. Most of the gain occurred in temporary help services (+29,000) and in professional and technical services (+35,000).
Health care employment continued to increase in March (+37,000). Over the last 12 months, health care has added 283,000 jobs, or an average of 24,000 jobs per month.
Employment in leisure and hospitality rose by 37,000 over the month, with more than two-thirds of the increase in food services and drinking places (+27,000).
Manufacturing employment continued to trend up in March (+17,000). Job gains were concentrated in two durable goods industries—fabricated metal products (+8,000) and machinery (+5,000). Employment in durable goods manufacturing has risen by 243,000 since its most recent low in December 2009.
In March, employment in mining increased by 14,000, with much of the gain occurring in support activities for mining (+9,000).
This data matches the private reports that came out this week from ADP, Challenger, Monster, TrimTabs, and even Gallup (more in a moment), which hasn't occurred for quite a while. The only fly in the ointment came from yesterday's jobless claims report from the BLS that was down slightly for the week, but actually up slightly in the 4-week moving average.
Here is how the data look:
The closely watched "U-6" report improved as well:
U-6 was not significantly improved according to the BLS. About 45.5% of unemployed Americans, or 6.1 million people, were out of work for more than six months in March, up from 43.9% in February.
Wage growth continues to be flat:
Over the past 12 months, average hourly earnings have risen by 1.7 percent. From February 2010 to February 2011, the Consumer Price Index for All Urban Consumers (CPI-U) increased by 2.2 percent.
One disturbing thing about the data is that much of job growth appears to be coming from low-wage jobs. For example the services sector added 78,000 jobs but they seem to be at opposite ends of the wages sector: temporary help services (+29,000); professional and technical services (+35,000). Also, the Leisure and Hospitality sector grew by 37,000 but two-thirds of the increase occurred in food services and drinking places (+27,000). Temps and waiters aren't going to grow this economy.
In an interesting piece from Costco's monthly magazine, in a debate on the value of a college education, Professor Richard Vedder argues that we are churning out too many college graduates who don't have the skills required by the workplace (he favors more vocational training). He says:
[T]he number of highly skilled, managerial, professional and technical jobs is growing far less rapidly than the number of new college graduates. We now have almost one-third of a million waiters and waitresses with college degrees, and more than 15 percent of taxi drivers likewise have a diploma. I have estimated that 60 percent of the increase in the proportion of Americans with college degrees since 1992 has ended up doing jobs that the Bureau of Labor statistics says do not require a college diploma.
We can conclude from this that while employment is growing, such growth is tepid at best. While the government and many economists can spin it in a more positive light, we are far from job growth as opposed to stemming the losses.
The Wall Street Journal's Sudeep Reddy put the numbers in perspective which reveals the enormity of the task ahead:
The payroll gains in March were good. But we’d need eight years of consistent monthly gains just like that — taking us to the year 2019 — to bring the economy back to full employment.
The labor market lost almost 8.8 million jobs from the peak for payrolls in January 2008 (138 million payroll jobs, when the unemployment rate was 5%) to the trough in February 2010 (129.2 million). Since then, the U.S. has added 1.5 million jobs.
If the March gain of 216,000 jobs were to continue, payrolls would return to their peak in 34 months — early 2014.
But the economy also needs to add at least 100,000 jobs a month just to keep pace with long-run growth in the labor force. That brings us to early 2019 under March’s pace for payroll gains.
The bottom line: the labor market needs to be producing far more jobs — 300,000 to 400,000 a month — to put the labor market on a trajectory that most Americans would find acceptable. Even adding 300,000 jobs a month would take almost five years to get back to full employment.
I haven't tested these numbers, but, if true, they are sobering at best. Prior calculations were in the range of 200,000 to 250,000 jobs per month growth to get us back to "full employment." Of course many economist are projecting future employment gains on a straight-line continuous uptick based on today's news. The Fed is still forecasting another three years to get back to "full."
It reinforces my belief that the economy is still in a structural readjustment that will leave the middle class higher and drier. The long-term factors that will continue to affect employment include:
- The decline of the construction and real estate industry which supported a large services structure (commonly known as FIRE: finance, insurance, and real estate).
- Demographics related to retiring Boomers will force them to continue to work to prepare for retirement which makes them compete for lower paying jobs.
- A more competitive world that is able to compete with American expertise as their economies improve and provide more jobs for high skilled services which may reduce the pool for available technical skills.
- A dumbing down of our educational system that turns out more communications majors than software engineers.
- Inevitable higher taxation in the U.S. that will drain more capital from the economy.
- Government spending takes a larger and larger share of GDP.
- A monetary system that continues to debase the dollar and wipe out real savings needed for expansion.
This is not a definitive list, but it is one that will directly impact job growth in America. All of these factors will negatively affect future economic growth and the requirement for future employment gains.
For the near term, I see continued slow improvement in employment, but I think we are headed to a higher level of permanent unemployment than the 5% that existed in pre-crash 2008. I cannot predict a certain level, but my estimate is that it will stall out at 6.5% to 7.0%.
Again, as my readers know, I think this adds up to stagflation.
One last note. A Bloomberg interview with Pimco's Bill Gross yielded the shocking conclusion that Gross thinks these employment numbers prove that the Fed's quantitative easing is working. “Their objective obviously is to improve the economy and to create jobs, but also to put a floor under the stock market, and we know that’s working.” That is such an absurd remark that it deserves a separate article. Yes, it's putting a floor under the market--where else does he think those fiat dollars are going? Perhaps he will be our next "Crony Capitalist of the Month."
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US population between the ages of 20 and 64 = 185 million.
US employment = 139 million.
Number of unemployed Americans of working age = 46 million
Unemployment rate is 25%
Thank you for pointing that out Bruin4. At least some folks are actually researching the numbers. How about the fact that the workforce participation rate is at its lowest since 1983 and that if all the people that are no longer counted were added back in to the numbers the actual UE would be 12%. The figures released by the BLS are massaged and fuzzied so as to present a picture of recovery. What a farce.
Nothing new in these comments or article. Point is we are in a global market trap. China and other emerging markets will always have lower labor costs drawing away US jobs at all levels except for local service industry needs . Even at professional level you are seeing more and more foriegners such as physisians, investment advisors etc. Nothing wrong with this trend in a free market democracy, but the problem is we can not afford financing this economic model where less and less wealth is created. Magnifying the problem is income disparity created in a mad scramble to retain good jobs leading to greed inherant in an era of insecurity. Result is best jobs are tied in to the global economic model--namely finance and international trade further creating dependance on the global market. The Nation State concept is also sacrificed--no allegence to America. Similarly polititians now represent lobbyists rather then local constituencies. Current debate on budget does not reflect real problem or real solutions, only how to perpetuate the ongoing losing model. Outcome is obvious, question is when--meanwhile keep on trading and forget about long term investments, especially in America
Q: Where is unemployment heading?
A: Euthanasia.
Age demographics are painfully absent from all of the data I see.
I have no doubt that the 35-65 crowed are getting dumped and replaced with peach faced 15-25 year old's who are brought in at 1/2 the pay and benefits (plus they don't have kids on insurance yet).
Service sector servicing lawyers, bankers, accountants, and politicians and government largesse and other sectors of service.
Our economy is becoming a giant circle-jerk.
hey don't knock peaches n plums... it's good for the vitamins and the skin of my bum! More important the skin on my wife's bum!
Don't forget the effect of immigration on employment and wages.
We're importing roughly 1million plus legal alien workers and 1 million or so illegal workers a year-(or maybe double that), that's about 175,000 jobs a month consumed by foreigners, if we're creating 250,000 or so jobs per month and 175,000 are going to aliens we'll never get back to "full employment" without a mass immigration moratorium.
Add to that domestic growth we have to meet, and the constant downward wage pressure of importing cheaper workers while taxing existing workers to subsidize their own alien replacements could really cut economic growth.
Add on top of that our diminishing ability to import food and fuel with a declining dollar really complicates matters as we're both a net food and fuel importers so our ability to grow through immigration population growth is limited by our ability to get more credit.
Of course if you're a conspiracy theorist you could make the case that the Chicoms and the global Socialist and Muslim communities will continue to subsidize American foreign immigration policy for the specific purpose of "cultural & political annihilation" mass immigration into America could be funded for several more years at least until until politcal goals are met. (a France like voter constituency?)
I see GDP growth occurring-maybe , but definitely not per-capita economic growth which may even contract the GDP over time, as the population densities increase America could also shift from a "consumer driven society" too, as debtors living in 400sq apartments with food & energy rations aren't going to be big spenders of "stuff" like they used to be.
A kiss on the hand may be quiet Continetal...
Can you even hear me Tyler? If that's your real name :?)
99ers now become 149ers thanks new extension of Un-employment benefit. We are from the United States Government, we are here to help.
I don't see businesses trying to hire them as much as they are trying to bury the long-termers. Then they conflate said long-termers with multigenerational welfare recipients of the low income variety.
They can voluntarily choose to be a part of the solution at any time, but they keep choosing to add to the problem. How about dealing with that problem by making it harder to hire, and harder to pull all the hijinks that employers pull? Put things back into the hands of the applicant for once.
Background checks alone supposedly eliminate 65 million people from the work force. Throw in credit checks and drug tests and you have a large portion of the country who will never find work.
That, and if we still had the U-7, they'd be counted. Never mind that they should be put ahead of any efforts to go offshore.
Those 'checks' certainly didn't apply to Turbo Timmy.
The pay ain't that great...but plenty of career opportunities for robo-signers and title-washers.
One catch, must be willing to perjure one's self with lightning speed. Sign baby sign!
import 30% less oil, shut down all the nuclear reactors turn out the light and send everybody home to think about that
The number of people now employed in America is less than it was in 2000. Since then the population has increased by 30 million.
After three years of economic expansion, only 17% of the jobs that were lost in the recession have been regained.
Usually it's 200% at this point of a 'recovery.'
Also, wages are not recovering. In the past five months average hourly earnings in the US have risen by 1% – the slowest rate of growth in 25 years. What's happening is that workers are taking lower paid jobs than they had before, just to get back into the workforce. More than half say their new jobs came with lower wages; 36% have had pay cuts of 20% or more.
This is a big reason Wall Street is doing much better than the real economy, because companies are having a party with their bargaining power on wages, so wage costs are lower and productivity is higher because they're hiring better workers. That's all very well, but it means America's standard of living is declining.
Prepare accordingly brothers and sisters.
It has always been better to be a has been than a wanne be.
Look, the poor have been poor through all of this and the really rich have always been rich through all of this. The only people who are freeking out are in the middle and quiet frankly...BlaBlablabl...
Let me school you on sumthin',
STFU or do sumthin' before sumbody kicks U t' sleep.
Got it?
Clue- gold and silver are used to mount what? Bitches rule!!!
Will you take...?
Yes I do!
what demographic are you aiming at with those language skills?
Certainly not mine.
DavidC
showing fabricated and skewed charts based on lies and disinformation .
unemployment is closer to 22% and in 2008 you have no idea what the numbers where especially reporting government lies..
pull a number out of a government hat
+1 Truth you speak....but alas, the sheep have no ears for it.
Well at least 22% have ears for it, no?
As for the rest, 77% are just trying to get by/too busy with their own stupid bullshit to care, .5% are working on taking eugenics to the next level, and .5% are here on ZH.
77%, What?
Don't underestimate us. JACKASS! You may have to depend on those percentages.
Everyone of those low class biatches gotz antwerp rocks.
You thunkz London is goin' down? getz realz.
Bloodz 4 stones not olive oilz.
Sure keep creating more service sector jobs and outsource more. Now that is just a great idea, Fing Idiot Economist and Lobbyuist. Hang the bitchez
As more and more baby boomers turn 65 and are no longer employable you will see a shift in the demographics. The death panel style medical coverage will start culling the heard faster and faster and we will no longer have to worry about systemic retirees.
Yeah but the problem is once theses retirees leave their jobs, They are not replacing them. This economy has turned into a complete service sector, with little to no manufacturing. We can only do each others laundry for so long before something gives. I'm big on a recovery and turning this boat around but we can't with the current situation and just by saying recovery isn't going to cut it.
http://www.dailyjobcuts.com