Volatility

August 10, 2009

Jobs Report

Filed under: Health Racket Bailout — Tags: — Russ @ 5:13 am
The only true measure of the health of an economy is how many decent living wage jobs it creates or destroys. This is also the measure of any economic policy, and any “recovery”.
 
The new BLS jobs report has immediately taken its place in the green shoots pantheon. Mainstream commentators and corporatist boosters are trumpeting two figures:
 
1. In July only 247,000 jobs were destroyed. While this is a big number even by recessionary standards, it was the lowest since December 2008.
 
2. After rising for months, the unemployment rate declined to 9.4% from June’s 9.5.
 
To hear the administration and the MSM, this is marvelous news. The NYT called it “most heartening”,  while the Obama has been quick to claim credit for the stimulus. Coupled with the report that for the spring quarter GDP declined “only” 1% (much better than this past fall and winter), the news has everyone crowing that this summer is the big turnaround.
 
But these reports are perhaps not quite as resplendent as everyone is making out. The so-called unemployment decline is on account of 400,000 “discouraged workers” giving up the search, thereby removing themselves from the official work force. When we compare such unpersons with the adult population as a whole, we find that the adult “participation rate” (which the 400K have dropped out of) in the labor force has fallen from 65.7% to 65.5, and the proportion of adults who have jobs has fallen from 59.5% to 59.4.
 
9.4% is now the official U-3 figure. If the 400K nonparticipating workers were still counted, this figure would have risen from 9.5 to 9.7. And if we use instead the U-6. the broadest, most accurate figure, which encompasses the entire real labor force including the underemployed, we have a figure of 16.3%.
 
So if these discouraged workers were to reenter the job search (for example if they were encouraged by these reports about an improving job situation), the U-3 would probably increase again.
 
So the unemployment rate numbers don’t convey much useful information. What’s more important is the duration of joblessness suffered. At his blog the NYT’s Floyd Norris has assembled the really important unemployment numbers. While the rate of unemployment for those out of work 14 weeks or less is now at its lowest since 12/08, the rate for 15 weeks or more is the highest ever, up 74% since December.
 
What’s more, over a third of the unemployed have been jobless for 27 weeks or more. This is the highest rate ever since records were first kept starting in 1948. (Remember, we’re talking about people who are actively looking for work. One in three has been at it for over half a year.) In December the average time it took to find a new job was 20 weeks. Today it is greater than 25.
 
So we can see that this green shoot has been somewhat greenwashed.
 
Norris has also provided an analysis of the distribution of job creation and loss over the past decade. For the first time since the Great Depression there has been practically zero private sector job creation over the last ten years (.01% per year, compared with >1%/yr from the early 60s thru 1999).
 
The following figures are for the last ten years. The biggest losses have been in manufacturing (down 3.7%/yr, auto manufacturing 6.7) and construction. Retail sector employment as a whole was down .2% even as it rose 1% at the big box stores.
 
The private sector gains were in health care, especially care for the elderly, corporate services (accounting, computer systems, legal), and biggest of all, management and “technical consulting” (up 5%).
 
In the aggregate, almost all job creation in the last decade was in government. This is quite a commentary on conservative ideology, with its faith in the infinite creative genius of the private sector and the fecklessness of government. On the contrary, the numbers prove the complete and absolute failure of the “free market” to create and conserve good jobs.
 
So what conclusions can we draw from all this? The jobless rate decline is bogus, so anyone who makes a big deal out of it is a deceptive propagandist. What’s more, not only has government been the major job creator over the last decade, but it is a particularly big contributor now. But this is almost completely on account of the stimulus. The Uchitelle article linked above quotes consultant Ian Shepherdson: without the stimulus there would be no consumer spending or business investment, and “the economy would grind to a halt”.
 
On a more profound level, what implications can we tease out of the sectoral figures? Manufacturing and construction , perhaps indicative of a youthful, vigorous economy, are in terminal decline. Only a crazed bubble was able to prop up the latter, which is no longer environmentally sustainable anyway. Yet a major growth industry is home and health care for the elderly. Think about that – an economy based on the “growth sector” of the impoverished young waiting on the idle old. How sick is that? It could be the basis for a satirical novel, or a case study in decadence and decrepitude. (I say this not to disparage decent care for the elderly, but to attack a system which looks ready to try to indenture the young to service a feudal stratum of rent-seeking geriatric wealth. Of course the vast majority of the non-rich elderly would be stuck with the deteriorating, soon to be insolvent public system.)
 
Norris presents an evocative panorama: When the economy recovers and job creation resumes, based on the trends of the last decade we’ll see growth in, on one hand such things as architectural and engineering firms (up 1.2% over past decade), on the other hand jobs like in bars and restaurants (up 1.8).
 
In other words, if there really is a temporary “recovery”, as the green shoots crowd calls it, we’ll see the further intensification of feudal stratification and social control where the only job growth is in service jobs waiting on the rich, some high end (but dependent and offshorable), most racing to the bottom in wages, benefits, working conditions, any hope for the future.
 
So by any real measure, the recent news is grim.
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