Thursday, January 27, 2011

Where are the Jobs?

Even though the media cheerleaders (such as this from CNN, this from McClatchy, and this from Reuters) keep trying to tell us that the US economy is looking up and hiring is going to expand, reality keeps rearing its head to proclaim otherwise. And even the cheerleaders have to temper the optimism somewhat. From the CNN article:

Companies are expecting less of a boost in the areas of employment and investment spending, with 68% of firms saying the tax deal will have no effect on hiring, while 37% said it would have a positive effect. Only 1% said hiring would be negatively effected.

From the McClatchy article:
Finally, after months with the economy essentially stuck in neutral, there are encouraging signs: Employers are beginning to add jobs, from manufacturers of steel, cars and heavy machinery to online retailers and high-tech firms.

But like a massive cleanup after a natural disaster, righting the nation's economy after losing 8 million jobs will be a long, painful process for millions of job seekers.

The worst economic downturn in a generation has sorely tested the patience and resolve of American workers, and analysts say it could take another five years before the unemployment rate returns to a "normal" 6 percent.

And from the Reuters article:
(Reuters) - Payrolls will grow in almost all U.S. metropolitan areas this year, but the gains will be slight, according to a forecast from IHS Global Insight, Inc. released by the U.S. Conference of Mayors on Wednesday.

The report found that 88 percent of the country's metropolitan areas, 319 in total, will see employment growth this year, and in 2012 all metro areas will see some job gains.

But in 150 metro areas, employment will increase by less than 1 percent.

By the end of 2011, 156 metropolitan areas will have unemployment rates of 9 percent or higher, while 30 areas will have unemployment rates of 6 percent or below.

Notice how the McClatchy article has the "normal" for unemployment now at 6%? Reuters discussed this situation here:
The natural rate is the level of unemployment below which troublesome price pressures might begin to build. A higher rate would suggest the Fed may need to reverse its massive monetary easing sooner than would otherwise be the case.

"How far do you let the unemployment rate fall before you have to start raising rates to head off inflation? That's what the debate is about," said Paul Ashworth, an economist at Capital Economics.

Over the last decade economists have pegged the natural rate of unemployment at about 5 percent, according to a survey by the Philadelphia Fed. Last October, the average estimate jumped to 5.8 percent, the highest level in the survey's 15-year history.

The article goes on to quote one fed member saying the "natural" unemployment rate may now be 8%!

The AP (via MSNBC) on Tuesday reported that unemployment had gone up in 20 states, fell in 15 states and remained the same in 15 states. Last week the NY Times had a blog post:
New York City’s unemployment rate fell below 9 percent in December to its lowest level in 20 months, but not because more residents found work at the end of the year.

The decline in the unemployment rate to 8.9 percent, from 9.1 percent in November, resulted from a decrease in the number of people looking for work, possibly because they were discouraged about their prospects. Indeed, data released Thursday by the state labor department showed that the number of private-sector jobs in the city declined slightly in December, shrinking by 3,600 jobs, or 0.1 percent.

The Boston Globe presents a study that goes a bit against the grain of conventional wisdom:
From the US Chamber of Commerce to the halls of academia, the warnings have been abundant: A shortage of skilled workers with college degrees will create a workforce crisis by the year 2018.


The researchers said studies forecasting labor shortages ignore a large and growing number of college graduates who work in low-skill, low-paying occupations. These are the legions of overeducated waiters and waitresses, retail clerks, and receptionists who hold college degrees, a problem known as “malemployment.’’

If this hidden college-educated workforce is considered, then looming shortages in occupations requiring college degrees appear less dire, Sum and Harrington argue.

Sum said about 25 percent of all employed, college-educated adults in the nation work in jobs that don’t require a college degree. That number increases to nearly 40 percent for recent college graduates, many of whom are struggling to repay loans.

I find it a bit amazing that at the same time we are struggling to find jobs for millions of people who are un and underemployed, the US Chamber of Commerce can put out a report proclaiming that there is going to be a drastic shortage of educated people to fill jobs within seven years.

Today (January 27, 2011) had the Initial Jobless Claims report (via Reuters) jumping 51K:
Initial claims for state unemployment benefits jumped 51,000 to a seasonally adjusted 454,000, the highest since late October, the Labor Department said on Thursday. That was the largest weekly increase since September 2005. The rise exceeded economists' expectations for a slight gain to 405,000.

A Labor Department official said four states had reported an increase in claims that was due to snow. In addition, he said, seasonal volatility also affected the data.

Still, the four-week moving average of unemployment claims -- a better measure of underlying trends, rose 15,750 to 428,750 last week, implying a gradual labor market recovery that could compel the Federal Reserve to complete its $600 billion bond buying program aimed at bolstering the economy.

President Obama in the State of the Union speech Tuesday night seemed to recognize the need for jobs, yet does not offer any concrete proposals to get US workers back to work. And things are not helped along when Republican Governors cancel construction proposals.

We've seen how President Obama keeps reaching out to the business community with mixed results. Simon Johnson in today's NY Times Economix blog cuts straight to the point:
President Obama is embarked on a major charm offensive with the business sector, as seen, for example, in the appointments of William M. Daley (formerly of JPMorgan Chase, now White House chief of staff) and Jeffrey R. Immelt (chairman and chief executive of General Electric and now also the president’s top outside economic adviser).

This should not be an uphill struggle – much of the corporate sector, particularly bigger and more global businesses, is doing well in terms of profits and presumably, at the highest levels, compensation. But when exactly will this approach deliver jobs and reduce unemployment? And does it increase risks for the future?

Of course, one of the things that might help the jobs outlook is if the banks would pay back the bailouts they received rather than continuing to post huge profits and pay out excessive bonuses. From McClatchy:
WASHINGTON — Goldman Sachs, Morgan Stanley and other Wall Street giants that played roles in the subprime mortgage debacle are reporting huge profits and awarding hefty bonuses again even as the government remains on the hook for tens of billions of dollars of their debt.

Banking behemoths are among the scores of lenders and insurers that floated as much as $345.8 billion in federally guaranteed bonds under a program that's widely credited with helping to keep money flowing at the height of the financial crisis, when businesses had nowhere to turn for capital.

Now, with the crisis in the rearview mirror, banks that escaped tough federal pay restrictions by retiring more than $200 billion in direct loans from the Treasury Department are still benefiting from the Federal Deposit Insurance Corp.'s less-conspicuous debt guarantee program, which has no such strings attached.

Read more:

I wish I had answers. The only thing I do know is free markets aren't free, economists really have no clue (even recognized by the BBC in this article), and there are still millions of US citizens un and underemployed and all the talking and dancing by both sides in Washington are doing nothing to address the problem.

And because I can:

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