About the April jobs report – no new jobs, a result bought at great cost

1. Bluestocking

   4 May 2012 at 5:44 pm

   The saddest part of this is that a lot of the new jobs which have been created over the past couple of years have been low-wage and/or temporary jobs with few (if any) benefits. These jobs might put people to work, but they don’t help improve the economy significantly because such jobs don’t provide people with much discretionary income (if any) which they can afford to put back into the economy with the result that they’re reluctant to spend any discretionary income they might have because they know their current situation is precarious. Of course, this helps perpetuate a vicious circle — business claims that they don’t want to hire more people until the economy improves, but the economy isn’t likely to improve much unless or until they do because the last few years have made people afraid to spend money.

   Also, as much as I hate to point this out, the possibility can’t be ruled out that the people who orchestrated the stimulus deliberately sabotaged the pressure for reform in order to reduce calls for a jobs program similar to the New Deal reforms. Like it or not, the fact is that the chances of being able to get a federal jobs program on a par with the CCC or WPA up and running would have been an uphill battle at best since this would almost certainly have triggered widespread shrieks of protest about “SOCIALISM!” from the right — especially given the criticisms which were (and are) already being directed against public-sector employees.

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2. annanic

   4 May 2012 at 8:59 pm

   Why are farm workers excluded ?

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3. Thomas Moore

   5 May 2012 at 3:12 am

   To amplify on Bluestocking’s point that “The saddest part of this is that a lot of the new jobs which have been created over the past couple of years have been low-wage and/or temporary jobs with few (if any) benefits,” the economic data show that “Since the 1970’s net new jobs have been disproportionately created in low- wage industries… Moderate growth in the share of employment in part-time and temporary jobs, which tend to have low wages, few benefits, and little security, provides some evidence of deteriorating job quality.”

   Source: “Job growth and the quality of jobs in the U.S. economy,” Susan N. Houseman, Upjohn Institute working paper No. 95-39, 1995, pg. 9.

   So there’s been a low-wage bias in the new jobs created in America for 40 years, not just “the last couple” of years.

   This op-ed by the billionaires at Bloomberg proposes a solution: “Time to raise national minimum wage again: Adjusted for inflation, the current rate is lower than it was in 1968 and offers no one a way out of poverty,” MSN Money website, 18 April 2012.

   This solution is delusional and obviously counterproductive. Plummeting American wages are exactly what economics 101 would lead us to expect as a result of global wage arbitrage. As Steven Roach, a senior economist at Morgan Stanley, pointed in a New York Times op-ed:

   “Under unrelenting pressure to cut costs, American companies are now replacing high-wage workers here with like quality, low-wage workers abroad. With new information technologies allowing products and now knowledge-based services to flow more easily cross borders, global labor arbitrage is likely to be an enduring feature of the economy.”
   — Source: “More Jobs, Worse Work,” Steven Roach, The New York Times 22 July 2004.

   Increasing the minimum wage for Americans will merely accelerate the offshoring and automation of U.S. jobs because it will increase the already huge disparity between high American wages and the much lower wages of third-world workers.

   “…As Steven P. Jobs of Apple spoke, President Obama interrupted with an inquiry of his own: what would it take to make iPhones in the United States?

   “Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.
   “Why can’t that work come home? Mr. Obama asked.
   “Mr. Jobs’s reply was unambiguous. `Those jobs aren’t coming back,’ he said, according to another dinner guest.”
   — Source: “How the U.S. Lost Out on iPhone Work,” The New York Times, By Charles Duhiggs and Keith Bradsher, January 21, 2012.

   Moreover, as jobs increasing flow out of the U.S. and into countries like China, foreign countries build up such a sophisticated factory infrastructure that even if the wage disparity were to drop to zero, the lost American jobs couldn’t come back home because America no longer has the production facilities to manufacture the items built overseas.

   “So the decline of manufacturing in a region sets off a chain reaction. Once manufacturing is outsourced, process-engineering expertise can’t be maintained, since it depends on daily interactions with manufacturing. Without process-engineering capabilities, companies find it increasingly difficult to conduct advanced research on next-generation process technologies. Without the ability to develop such new processes, they find they can no longer develop new products. In the long term, then, an economy that lacks an infrastructure for advanced process engineering and manufacturing will lose its ability to innovate.”
   — Source: “Why Amazon can’t make a kindle in the U.S.,” Steve Denning, Forbes online, 17 August 2011

   The other solution, proposed by President Obama in a recent speech, is to erect tariff barriers to protect U.S. jobs. This solution is even more bizarre and more foolish than the proposal to increase the minimum wage, Raising U.S. tariff barriers would only have the effect of creating retaliatory tariffs worldwide, which would reduce global economic growth and depress the U.S. economy. Increased U.S. tariffs targeted at specific countries would have no effect, since other third world countries would simply import the same goods into the U.S. as the targeted country. And if successful, high U.S. tariffs would increase the cost of all foreign imports — which today account for essentially all American-bought consumer electronics and consumer durable items — which would have the effect of decreasing the standard of living of the American worker as the cost of flat-screen TVs, iPods, DVD players, and cars skyrocketed while U.S. wages remained flat.

   “[In his 2012 State of the Union speech] The president said a get-tough tariff on tire imports from China has saved more than 1,000 U.S. jobs. But tire industry officials say Chinese imports have simply been replaced by imports from other countries.”
   — Source: “The State of Obama’s Facts: We assess what was said, and left unsaid, at the State of the Union address,” 25 January 2012.

   You may ask: So what’s the solution?

   …Who says there is one?

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   1. Fabius Maximus

      5 May 2012 at 3:58 am

      How difficult will it be to give a strong rebuttal to all those quotes of plutocrats and their tools? Think, think, think. Got it!

      Germany. All of Northern europe. They have maintained strong manufacturing bases, exporting to the world, along with high living standards. That’s the path Singapore and others plan to follow.

      “So what’s the solution?”

      Stop listening only to plutocrats and their tools. Their advice to us is “bend over and grab your ankles.” But there are other paths.

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   2. Pluto

      5 May 2012 at 1:26 pm

      An impressive rebuttal, FM. But you do have to admit that part of the German success was the willingness of the rest of Europe to give the Germans a powerful competitive advantage in the form of a single currency.

      But I strongly agree with you that there are other paths. In the long run I suspect that some form of local 3-D print manufacturing is going to steal back a lot of jobs from China and other places.

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      1. Fabius Maximus

         5 May 2012 at 3:17 pm

         “But you do have to admit that part of the German success was … But I strongly agree with you that there are other paths.”

         The most common response to analysis of America’s problems — in the comments on the FM website and elsewhere — is despair. We have no choice but to bow before our plutocratic overlords. Our fate results from technology, or economics, or some other fool thing. It’s total nonsense.

         Germany and the other northern European nations (its not just Germany) have found other paths. Other first and second world nations (eg, Singapore) have found other paths. So can we.

         But we are on another path. We’ve already made the key mental adjustment necessary to turn citizens into subjects. Much like that of the Romans’ evolution from the Republic to Empire. All their worldviews were passive (bowing before the State): Stoicism, Epicureanism, Hedonism — and eventually, Christianity. So it is in America.

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   3. Pluto

      5 May 2012 at 6:31 pm

      I’m not giving in to despair, FM, but I fear you are. I refute Thomas Moore’s argument that manufacturing in the US is dead or that its status is even going to be particularly relevant to the long-term health of the US economy.

      For example, if we are shipping all of our manufacturing jobs overseas, why is there a currently such a shortage of trained manufacturing technicians in the US? This is a momentary data point that doesn’t really predict the future but it shows that manufacturing isn’t dead in this country, just that it is changing and it will probably change again in the next few years.

      As you say, we’re on different path from Germany and the situation is rapidly evolving. Too many people look at one aspect of the incredibly complex manufacturing situation and try to predict the outcome of the entire industry from a handful of data points.

      My personal suspicion is that the end-state manufacturing of plastics and similar products will eventually (20-50 year out) become so cheap and easy that people will find that home 3-D printing will be more cost-effective than making it overseas and transporting it here. But I’m not about to predict anything with any degree of certainty, there lies madness.

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      1. Fabius Maximus

         6 May 2012 at 12:32 am

         Pluto,

         This thread covers a lot of conceptual ground. You’re conflating several aspects.

         (1) “if we are shipping all of our manufacturing jobs overseas”

         We cannot have a serious discussion with such cartoon-like theories, like “all of our jobs”. Manufacturing employment peaked in 1979 at 19,426 million. It was 17,695 in 1990 and 17,263 in 2000. As of 2011 it was 11,733 million. Down 40% from 1979 and down 1/3 from 2000 — showing a steady long-term trend. There are many causes of this, such as technology and public policy — and the overvalued US dollar. However, it is a global trend.

         (2) My comments were about the distribution of political power in America, and its economic effects. Not manufacturing or other sectoral trends.

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   4. Bluestocking

      6 May 2012 at 1:31 pm

      Of course, the really savage irony is that smaller manufacturing companies here in the US — especially in more rural areas — are now complaining that they can’t find enough properly skilled people for certain positions (such as machinists). I hate to break it to you, fellas, but this is unfortunately part of what you have to expect when you allow a lot of your manufacturing sector jobs to be shipped overseas *and* put people who are vehemently anti-union in positions of power. You get a workforce which in many cases doesn’t value manufacturing and no longer knows how to manufacture anything…not a good place for us to be.

      Another problem is that with each technological leap forward, a certain number of people will be thrown out of work and need to be trained for another profession. In the past, the manufacturing sector absorbed many of the people who were gradually displaced from agriculture by the Industrial Revolution…and more recently, the service sector absorbed many of the people who were gradually displaced from the manufacturing sector. However, we’re in a bad position right now because many positions in the service sector do not require specialized skills and therefore do not usually pay terribly well — and to make matters worse, the service sector appears to be nearing a point of saturation (if it isn’t already there) and technology is also beginning to replace service-sector workers such as cashiers with automatic self-service kiosks in much the same way that ATMs replaced bank tellers. Unless we make a concerted effort to bring technology and/or manufacturing jobs back into this country, we’re going to have a problem because there are no longer any other large-scale industries which can absorb most of the displaced workers (which is why many employers are only offering part-time and/or temporary work…because they know they can).

      Assuming that technology continues to evolve at an accelerating pace to the point that we begin to move toward “smart cities” like those being proposed by IBM and Cisco (where virtually everything is automated) — and there’s no particular reason to believe this won’t happen, barring some unforeseen catastrophic event which destroys a significant amount of the infrastructure and/or the workforce — what are the effects likely to be? (Here’s a rather interesting article on the development of “smart cities” and the potential implications for human beings — “The internet of things and smart cities: Will an IBM computer be your next mayor?“, Extreme Tech, 26 April 2012) Yes, the kind of technological development described in this article is still a long way off — at least a generation or two — but if we don’t start thinking about it now, especially since we already seem to be getting a faint glimpse of the potential repercussions of such a scenario right now, then we won’t be prepared to deal with the problems that will inevitably arise when it begins to manifest itself (especially given the fact that this will almost certainly be a development in human affairs every bit as significant as the Industrial Revolution).

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      1. Fabius Maximus

         6 May 2012 at 2:19 pm

         “that smaller manufacturing companies here in the US — especially in more rural areas — are now complaining that they can’t find enough properly skilled people for certain positions (such as machinists)”

         I have seen several of those stories, and they’re totally bogus. These employers want highly trained and experienced workers, but are unwilling to pay decent wages for them. It’s simple supply and demand. Offer too little and you’re unable to gain sufficient supply. The supply of good nickel cigars is always zero.

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   5. Bluestocking

      6 May 2012 at 4:23 pm

      “These employers want highly trained and experienced workers, but are unwilling to pay decent wages for them.”

      Not certain that’s entirely true, FM. According to one article on the subject which recently appeared on CNN, a qualified and experienced machinist earns around $60K (or significantly more if they’re willing to work overtime). In my opinion, that counts as a fairly decent wage (depending in part on cost of living for your location) — especially since it’s higher than the current estimated median household income, which describes total family income rather than individual income. Frankly, when you consider the way in which many people have been putting themselves in debt to the tune of four or five figures (or even six figures in some cases) in order to go to a four-year college with the result that as many as fifty percent of recent grads are either unemployed or underemployed — making you wonder whether a bachelor’s degree is still a worthwhile investment — an occupation which is paying that much after only a year or two at a trade school followed by spending a few years as an apprentice actually sounds rather like a bargain. The plain and simple truth of the matter is that a lot of people these days — let alone recent grads! — would kill to make that kind of money.

      Of course, one of the drawbacks to being a machinist is that it isn’t very glamorous, and heaven knows that you’ll probably never become wealthy doing that sort of work…but being unemployed or underemployed isn’t very glamorous either (which is where a lot of people have ended up anyway despite all their efforts). From the sound of it, If you’re practical and play your cards right (especially if you’re willing to live in a more rural part of the world where the cost of living is fairly low by comparison), it sounds as if you can actually do fairly well for yourself these days as a machinist. The problem is not always a lack of willingness to pay decent wages (although that undeniably plays a role in many parts of the private sector) — there are also areas in which it’s also a question of specific training and/or experience which the majority of the people currently unemployed or underemployed simply don’t possess (in the case of machinists, in large part because the manufacturing sector in this country has been steadily declining over the past few decades, with the result that there has been less demand for people with those skills).

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      1. Fabius Maximus

         6 May 2012 at 5:18 pm

         This is total bunk.Like so much of our consensus thinking, it results from full-spectrum propaganda from well-paid shills from our ruling elites.

         This is why we’re losing. They can manufacture lies at a greater pace and disseminate them more widely than we can provide rebuttals. Lies about the progress of our foreign wars, GOP fake debt-reduction plans, bogus analysis of economic theory and the economy — we’re not only playing defense, but doing so unsuccessfully. I have a two foot high pile of news articles which can be broadly categorized as “lies”. I’d like to write rebuttals, but could not do so even 24-7. I would like to list them, but that would be a full-time job.

         (1) Let’s consider this little myth. Most of the specific stories are bogus. I could cite a dozen, but will give three examples.

         (1a) ‘Skills gap’ leaves employers without workers in pipeline, Boston Globe, 3 July 2011 — demolished with this simple rebuttal:

         Ultra Scientific’s business is growing because Thermo Fischer Scientific is closing their plant in East Providence and laying off 66 workers who do all the things that Ultra does. They are moving production to Virginia and Texas. Neither of them is exactly a hotbed of trained workers.

         Here’s what Thermo Fischer Scientific’s Spokesman, Ronald O’Brien, said last August, “At least two or three employees will be asked to relocate, some to other positions, O’Brien said. The bulk of the workers, mainly technicians who produce the test kits to detect diseases, will be laid off and offered a severance package”.

         So they were able to hire one of the three PhDs who chose not to move. But you don’t need a PhD to run an HPLC. A lab tech with a high school education can do that. But one thing that is certain is that a PhD in Chemistry will never make enough to pay back the costs of their education at a lab techs salary. Ultra Scientific is within 50 miles of the largest concentration of chemistry education in the world and he can’t find anyone to work for him? The reason why Russo can’t get people is because he is not paying enough!

         (1b) “Some Firms Struggle to Hire Despite High Unemployment, Wall Street Journal, 9 August 2010 — Easily demolished by Yves Smith at Naked Capitalism:

         So an employer who is having a hard time hiring needs to consider that the generally slack labor marker may not be relevant to his market, and he therefore may need either to change work processes so as to require less specialized labor, train workers, pay more, or do without. We see some of that at work in the story:

         At Mechanical Devices, which supplies parts for earthmovers and other heavy equipment to manufacturers such as Caterpillar Inc., part owner Mark Sperry says he has been looking for $13-an-hour machinists since early this year. The lack of workers is “the key limitation to the growth of our business and to meeting our customers’ expectations,” says Mr. Sperry. He estimates the company could immediately boost sales by as much as 20% if it could find the 40 workers it needs.

         Trips to several job fairs yielded almost nothing, so the company set up a 10-week training program to create its own machinists. Out of the first group of 24 trainees, 16 made it to graduation.

         Mr. Sperry sees extended jobless benefits as one of the main culprits behind his company’s hiring difficulties. Many of the applicants he saw at job fairs, he says, were just going through the motions so they could collect their unemployment checks.

         This does not add up. If the company can afford to spend ten weeks training people (and the additional cost of setting up a course), that suggests it could have offered more than $13 an hour, particularly given the opportunity cost of the orders it could have filled if it had had people on board sooner. The article later notes that Mechanical Devices “hire[s] through staffing agencies to help control health-care costs and maintain flexibility.” Um, that means they fire people as soon as orders fall.

         Other employers seem not to recognize they are lowballing:

         Paul McNarney, owner of The Mower Shop in Fishers, Ind., says he has been looking for a good lawnmower mechanic so he can guarantee a one-week turnaround on repairs. He received only two responses to an Internet ad he placed a couple of months ago, even though the job can generate income of more than $40,000 a year, depending how many mowers the mechanic repairs. Similar ads he placed before the recession attracted more than a dozen candidates, he says.

         “My thought was that in a cr— economy I could probably find somebody good because a lot of people were looking,” says Mr. McNarney, who has been in business for 13 years selling everything from simple lawnmowers to big riding models for large properties. “I didn’t find anybody.”

         Let’s see. McNarney apparently already has a repairman; this “hire” is to shorten McNarney’s turnaround time. But this “job” appears to be paid on a piecework basis, on referrals from McNarney, and this new worker probably only would get work at a few peak times a years, since the current repairman is presumably top banana. So the $40,000 number is pure BS.

         In fact, the logical response to that ad would be to compete with McNarney, not work for him. Why let him take the markup on your time for erratic referrals, meaning no job security? But the subtext of the article is that the buyer, meaning the employers, is always right.

         (c) More broadly, look at actual evidence — not the anecdotes usually cited (ie, employers complaining):

         (c1) “‘Skills Mismatch’ Causing High Unemployment? Not Quite“, Huffington Post, 21 March 2012.

         (c2) “Worker Skills and Job Quality“, David Neumark and Rob Valletta, Federal Reserve of San Francisco, 30 April 2012 — Abstract:

         Some observers have argued that the nation’s high unemployment rate during the current recovery stems partly from widespread mismatches between the skills of jobseekers and the needs of employers. A recent San Francisco Federal Reserve Bank conference on workforce skills considered evidence that employers have had difficulties finding workers with appropriate skills in recent years. However, these mismatches do not appear to be much more severe than in the past. Overall, the conference proceedings suggested the U.S. economy can still produce good jobs for workers at a variety of skill levels.

         (2) “In my opinion, that counts as a fairly decent wage”

         So Bluestocking does not believe in capitalism and free markets? Perhaps he would prefer that wages to be set by a board of employers who determine the “fair wage”? Perhaps customers and suppliers should set the prices at which he buys and sells? Will wise and well-informed technocrats plan an efficient and prosperous economy?

         Economics 101: supply and demand is met by changes in price. If workers are scarce, then raise wages — which will increase supply. If an employer is unwilling to raise wages (wages are a small fraction of costs in most manufacturing industries), then the employer is just whining about the lack of cheap workers.

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4. annanic

   5 May 2012 at 6:53 pm

   Agree Pluto , go to Mike’s FABriCUM down the road , sit at one of his consoles, type in the new phone model required , put old model in slot provided with 4 paper clips and a coke can lid , collect new phone all billed and set up for you in 10 mins. Can you and me set this up as a business , since everyone else laughs at the idea?
   Now why are farm jobs not counted please ? Do you not count grain merchants , hauliers , slaughtermen , agricultural researchers , rat catchers , farm insurance agents , potato graders either ?

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5. limbic

   7 May 2012 at 9:27 pm

   Thanks for this post. Along with the other posts this weekend, its certainly thought provoking.

   Douglas Rushkoff argued last year on CNN that the jobless recovery was to be expected because technology is replacing humans at a faster rate than jobs can be created. [“Are jobs obsolete?“, CNN, 7 September 2011]

   Around the same time, The Telegraph (in the UK) had an article claiming that “The American phoenix is slowly rising again. Within five years or so, the US will be well on its way to self-sufficiency in fuel and energy. Manufacturing will have closed the labour gap with China in a clutch of key industries. The current account might even be in surplus.” [“World power swings back to America“, Ambrose Evans-Pritchard, op-ed in The Telegram, 23 October 2011]

   I would like to believe that the USA is, with its newly discovered energy reserves and disengagement from its foreign wars, really is on the mend. But I honestly can no longer tell disinformation from fact when it comes to economics. I am relying on the sense makers here to help with that!

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   1. Fabius Maximus

      8 May 2012 at 2:52 am

      (1) The history of the US since 1973 has been a series of energy booms, fueled by hope and promoters. Oil shale, fusion, biofuels (corn, algae, switchgrass), solar, wind, and waves. The common characteristics are that the hopeful information comes from promoters; contrary information from independent experts gets ignored.

      And now natural gas. Some details.

      (a) We don’t know the extent of exploitable natural gas reserves, the costs, or the environmental impacts. Skeptics, such as Arthur Berman (fired from World Oil for disagreeing with the industry’s hopes), have some powerful data; see his website The Petroleum Truth Report. Also see “Shale Gas Hype: Subprime 2.0?“, Yves Smith, Naked Capitalism, 7 May 2012.

      Only time will provide answers to this debate.

      (b) As usual, the UK press has covered this better than the US media’s stenographers. Esp the Financial Times. Such as “Familiar echoes in shale gas boom“, 6 May 2012. And this, about the EIA’s systematic reduction of natural gas reserve estimates.

      (2) Evans-Pritchard is a columnist for the Telegraph. He writes opinion pieces. He’s known for his often outrageous opinions and passing on the occasional tall tale (example here).

      (3) The US imported 11.4 million barrels of oil per day in 2011 per the EIA. The odds of replacing that in any reasonable time frame is zero. This has been studied beyond extensively.

      (3) Rushkoff is a “media theorist”. Not a labor economist. While automation probably has played a role during this downturn, the broad nature of job losses shows that it is a minor factor. But over generations it has been a major factor. And will be for the next few generations: see these posts about the robot revolution:

      1. The coming big increase in structural unemployment, 7 August 2010
      2. The coming Robotic Nation, 28 August 2010
      3. The coming of the robots, reshaping our society in ways difficult to foresee, 22 September 2010
      4. Economists grapple with the first stage of the robot revolution, 23 September 2012
      5. The Robot Revolution arrives, and the world changes, 20 April 2012

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6. "'Employers announce 40,559 job cuts in April"

   8 May 2012 at 4:05 am

   “Employers announce 40,559 job cuts in April“, Challenger, Gray & Christmas, 3 May 2012 — Opening:

   The pace of downsizing remained virtually unchanged in April, as U.S.-based employers announced planned job cuts totaling 40,559 during the month. That is a 7.1 percent increase from 37,880 job cuts announced in March, according to the latest job-cut report released Thursday.

   April job cuts were up 11.2% from the same month a year ago, when employers announced 36,490 planned cuts, the lowest monthly total recorded in 2011. So far this year, employers have announced 183,653 job cuts, 9.8% more than the 167,239 job cuts by this point in 2011. Despite the year-over year increase, the monthly average of 45,913 through the first four months of the year is below the 12-month average of 50,507 in 2011. …

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