Friday, April 1, 2011

More Jobs Yet Falling Further Behind

I am afraid I may be starting to think like an economist. Now why would I be afraid I'm becoming an economist? Because I was surprised when the March Jobs Report came out from the Bureau of Labor Statistics and showed 216K new jobs for March, an increase of 15K even over the ADP report from Wednesday. From Reuters:

(Reuters) - U.S. employment recorded a second straight month of solid gains in March and the jobless rate fell to a two-year low of 8.8 percent, underscoring a decisive shift in the labor market that should help to underpin the economic recovery.

Nonfarm payrolls rose 216,000 last month, the largest increase since May, the Labor Department said on Friday. The gain built on the 194,000 new positions added in February.
David Dayen at Firedoglake News has done his standard excellent job of dissecting this report. And as he does, he manages to puncture the coming cheereladers, even before they get started:
And where did these new jobs come from? About 1/2 of the total came in the service sector. 29,000 hires came from temp work. Professional and technical services increased by about 35,000, and manufacturing and mining increased slightly. Health care was also a continued strong sector.

The public sector continues to be a drag on growth. It edged downward again, as $10 billion in budget cuts for the year, enacted in two stopgap spending bills, took effect. Since the peak in September 2008 (notice the time frame), public sector jobs have decreased by 416,000. And with expected cuts coming at the state and federal level, more layoffs are on the way.
I would like to reinforce a couple of his points here. Out of 216K new jobs, nearly half are in the services sector. 29K are in temp work. It is the expected cuts in public sector jobs at all levels that had me anticipating a far lower number of new jobs for March. The complete BLS News Release is here.

Of course, it didn't take long for a White House response to the BLS report. From Reuters:
White House economist Austan Goolsbee said on Friday the March jobs reports showed signs of an improving U.S. economy but that surely there will be bumps in the road ahead.
Today's NY Times had a few articles on some of those "bumps in the road" Mr Goolsbee mentions. First up is this one on people struggling to get ahead because of the low wage jobs:
Hard as it can be to land a job these days, getting one may not be nearly enough for basic economic security.

The Labor Department will release its monthly snapshot of the job market on Friday, and economists expect it to show that the nation’s employers added about 190,000 jobs in March. With an unemployment rate that has been stubbornly stuck near 9 percent, those workers could be considered lucky.

But many of the jobs being added in retail, hospitality and home health care, to name a few categories, are unlikely to pay enough for workers to cover the cost of fundamentals like housing, utilities, food, health care, transportation and, in the case of working parents, child care.
These would be the jobs in the service sector. From the BLS News Release linked above:
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).
This from wiki shows the median US Household income at just over $50k in '06. This compares to a report(pdf) from Wider Opportunities for Women, released today, (also referenced in the Times article). From Consumer Affairs on the WOW report:
A group called Wider Opportunities for Women (WOW) has developed a formula that suggests the average single worker needs to earn $30,012 a year - nearly twice the federal minimum wage - to cover basic expenses. Single parents require nearly twice the income ($57,756) to support two children, while dual-income households with children require $67,920.
So what else do we have going on for workers? Well, there's this (also from today's NY Times) on Florida's joining with Michigan to cut Unemployment back from 26 weeks to 20 weeks (this is the amount of unemployment that the state itself is responsible for before federal extended benefits kick in).
The Florida House of Representatives approved a bill in March that would establish the deepest and most far-reaching cuts in unemployment benefits in the nation. Like the law signed in Michigan on Monday, the measure would reduce the number of weeks the unemployed could collect benefits from the standard 26 weeks to 20.

But the House proposal in Florida — in a high-unemployment state that already has some of the lowest benefits — takes it one step further by tying benefits to the unemployment rate. If the rate falls, so do the number of weeks of benefits. If the rate dips below 5 percent, the jobless would collect only 12 weeks of benefits, the lowest level.

This has workers worried in Florida, where the unemployment rate, while continuing to inch down, is 11.5 percent, considerably higher than the nation’s rate of 8.9 percent. Michigan’s rate is 10.4 percent.
Of course, Missouri is getting in on the act as well, though they are blocking extension funds from the federal government, rather than the state only amounts. Again from today's NY Times:
The move, which came despite widespread bipartisan support for extending the benefits, puts Missouri at the center of a growing national discussion about reining in unemployment benefits at a time when both the job market and government coffers remain weakened.

In recent weeks, Republican leaders in Michigan, Arkansas and Florida have taken steps to limit their states’ contributions by cutting the duration of unemployment benefits.

But for now Missouri, with an unemployment rate above 9 percent, is the only state that has stopped accepting dedicated federal money to extend payments to 99 weeks from 79. (A number of states never joined when the program was initially offered.)
So where are the jobs? This article from today's NY Times points to the use of H1b visas by outsourcing firms to push down wages rather than because the skills don't exist within US citizens:
Loopholes in the visa program have made it easy for the outsourcers “to bring in cheaper foreign workers, with ordinary skills, who directly substitute for, rather than complement, workers in America,” the scholar, Ronil Hira, a professor at Rochester Institute of Technology who has studied the program, told the House Subcommittee on Immigration Policy and Enforcement.

Four of the five biggest users of the program from 2007 to 2009 were Indian outsourcing companies: Infosys, Wipro, Mahindra Satyam and Tata, Mr. Hira said. Microsoft was the only company with headquarters in the United States among the top five users, he said. Among them, the Indian companies sent 22,766 workers to the United States on temporary visas during the two deepest years of the recession.
Of course, they can't outsource hedge fund manager positions so those are paying quite well, even when the hedge fund itself doesn't do all that well (This is the last one from today's Times, I promise):
Last year was very lucrative for some of the biggest and best-performing hedge funds’ chiefs. Wealth was so concentrated that a mere 25 people pocketed a total of $22.07 billion, according to this year’s annual ranking by AR Magazine, which tracks the hedge fund industry. At $50,000 a year, it would take the salaries of 441,400 Americans to match that sum.

Hedge fund managers can still have huge paydays even in years when their funds do not perform well. That is because of the millions they earn in fees from charging state pension funds, college endowments and wealthy individuals to manage money. These fees are typically collected regardless of whether the firm has a profit or a loss.


In fact, the hedge fund industry as a whole did not do better than the stock market last year. The HedgeFund Intelligence Global Composite Index, which tracks nearly 4,000 hedge funds around the world, had a median gain of 8 percent in 2010, trailing the 11.7 percent rise in the MSCI World Index of stocks and the 12.7 percent rise in the Standard & Poor’s 500-stock index.

And this year’s list of top hedge fund earners includes a number of managers who pocketed hundreds of millions of dollars in fees but produced only single-digit returns for their investors. AR Magazine arrives at the pay figures by estimating a money manager’s portion of fees along with the increase in value of personal stakes in the funds.
But then, as this article from the AP (via MSNBC) points out, profits take precedence over jobs. Of course, management salaries are rarely cut but that's a story for another day.

And because I can:

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