Friday, April 06, 2007

The payroll figures (without my rose-colored glasses)

Most financial pages are cheering the employment figures released today. From Bloomberg, U.S. March Payrolls Rise 180,000, Jobless Rate Drops:
"Jobs are plentiful and employers are giving fairly large wage increases," Robert Gay, managing director at Fenwick Advisers LLC in Rye, New York, and a former Fed economist, said before the report. "Outside housing and manufacturing, the rest of the economy is doing pretty well and continuing to create jobs."
That sounds pretty good on the surface, until I dig a little deeper. From Kiplinger:
Even so, take the robust gain of 180,000 jobs last month with a grain of salt. Most likely, a portion of March's increase was a bounceback from hiring that was postponed in February by bad weather, particularly in the construction and retail trades.

Another sign of potential concern: Hiring in professional and business services, such as engineering and accounting, fell for the first time in many months. This could signal that the services sector, which accounts for about 80% of total employment, is feeling some of the slowdown that seems to have been confined mainly to manufacturing until now.

The net increase for March, plus revisions to the preceding two months, leave the monthly average employment increase at 152,000 for the first quarter of this year, compared with 188,000 for all of last year. We expect the average to fall to around 110,000 for 2007, yielding about 1.3 million jobs, as companies facing slowing profit growth try to contain labor costs.

The unemployment rate will creep up to about 5% by year end from the 4.4% rate posted in March. [emphasis mine]
An opinion in USA Today points in the same direction:
A slowing in the economy will likely soon lead to a deterioration in the job market, says Richard Moody, chief economist at Mission Residential in Austin, Texas. He expects job growth to ease to between 100,000 and 115,000 a month later this year.

"This might be the high water mark" for job creation for the near future, Moody says.
Adding credence to Kiplinger's concern about the decline in professional and business services hiring is this other nugget from USA Today:
Alan Blinder, a former Federal Reserve vice chairman, fears that in the next 10 to 20 years, this country could see 40 million jobs in such areas as accounting, health care and computer programming move overseas. He says the Internet and other communications advances make the physical location of these workers all but irrelevant. Even Wall Street is pushing for regulatory relief to partially offset the exploding global competition for investment banking services. [emphasis mine]

All of this makes for an interesting business model. But it raises troubling questions about the direction of the American economy and society.
The direction appears to be downward for a majority of workers faced with unemployment:
Across America, more than 30 million people have been forced out of jobs since the early 1980s, the Bureau of Labor Statistics reports, and regaining lost incomes has not been easy. Nearly 50 million new jobs have been created over that same period, according to the bureau, so there are always new opportunities but more often than not at lower pay. Among those who have lost work, only a third held new jobs two years later that paid as well as those that were lost, according to the bureau’s surveys of displaced workers. Another third of those displaced were in jobs that paid, on average, 15 to 20 percent less than their previous employment — while the final third had dropped out of the labor force entirely.
Which helps to explain this:
Commerce Department data released today show that the share of national income going to wages and salaries in 2006 was at its lowest level on record, with data going back to 1929.[1] The share of national income captured by corporate profits, in contrast, was at its highest level on record. [2]
Which in turn helps to explain this: Ford pays new CEO $39.1M in 4 months

And Washington wonders why most Americans see their glass as being half empty.


Lew Scannon said...

It's outrageous that Ford paid it's CEO so much money after he cut so many jobs there at the end of last year. He can only buy so many cars, where 30,000 employees with jobs could have bought, well, 30,000 cars. Have these people forgotten the lessons of their founder?

abi said...

Very telling stats. Makes you wonder what in hell working class and middle class Americans are thinking when they vote Republican.

CEW said...

A couple thoughts:

1. Thanks to the global credit/debt complex, persons formally identified as "workers" (already, somewhat less than human beings) are now largely consumers and debtors in the US. They are a financialized resource to be harvested, assets and income are converted to debt (i.e. home equity as "cash"), and interest continues to accrue to huge remote corporate banks.

2. The big industrial boom of the post WWII era worked because consumers were also productive. Their labor funded their purchasing and consumer debt had not yet become a way to defer pain.This current calculus (US citizens are consumers for the most part, and labor can be relocated globally) will not sustain the middle class in the US. But don't look to corporations to help indivduals claim their right to be creative, productive and prosperous. Corporations are not charged with maintaining the middle class.

3. Debt is not wealth.

dkmich said...

Delphi did the same thing with their CEO. Nice LMI diary.

Kathy said...

dkmich, thanks for kind words, and thanks for reminding us about Delphi. There's a lot of that going around these days.

Praguetwin said...

This is a really good stripping down of the data. I would add that the average work week is still quite low historically indicating more less-than-full-time jobs in the market which takes some of the shine off that unemeployment number.

Kathy said...

Praguetwin, good point. I also read that some salaried positions are experiencing just the opposite trend - longer and longer hours without additional compensation.