Tag Archives: employment

What you haven’t been told about the July jobs report

Summary:  Another jobs report, more clickbait headlines about the monthly noise. Here’s a look beneath the glitz to the important news. The US economy continues slow steady growth, with continued signs of slowing. Also, 47% of new jobs went to foreign-born workers during the past year. Important matters. Too bad neither the candidates, journalists, or Americans care about such things. On to the next astounding soundbite!

Contents

  1. The noise: monthly changes in jobs.
  2. The important news about the trend in number of jobs.
  3. A clearer trend: total number of hours worked.
  4. Where were the new jobs?
  5. What about the info sector jobs machine? Let’s all become programmers!
  6. A red flag: growth in temp workers has slowed to almost zero.
  7. It’s not a “Starbucks Economy”. See the slow but steady wage growth.
  8. Explosive news: 47% of new jobs went to foreign-born workers.
  9. Conclusions and For More Information

Here are the monthly numbers that generate the exciting headlines!
It’s noise. The trends are almost impossible to clearly see.
Graph of the monthly change in jobs since Jan 2013 (SA).

New Jobs by month through July 2016.

Here is a more useful graph. Employment is still growing, but slowing.
Do you see why the monthly outpourings of joy or despair during the past 4 years?
The real story is the stability of the slow growth in the US economy.
Graph of the year-over-year percentage growth in jobs (not seasonally adjusted).

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ECRI explains the global slowdown, and what lies ahead

Summary: The Economic Cycle Research Institute (ECRI), who correctly predicted the slow recovery, looks at the multi-year slowing in the economies of the developed nations — its causes (the world is becoming Japan) and likely consequences.

The Business Cycle

ECRI’s Simple Math Goes Global

ECRI, 20 June 2016.
Reposted with their generous permission.

The risk of a global recession is edging up, as the global slowdown we first noted last fall continues (ICO Essentials, September 2015). This danger is heightened because longer-term trend growth is slowing in every Group of Seven (G7) economy, as dictated by simple math: growth in output per hour, i.e., labor productivity – plus growth in the potential labor force – a proxy for hours worked – adding up to real GDP growth.

As we laid out over a year ago (USCO Essentials, June 2015), this simple combination of productivity and demographic trends reveals that U.S. trend GDP growth is converging toward 1%. This is reminiscent of Japan during its “lost decades,” where average annual real GDP growth  registered just ¾%,  which is why we have cautioned that the U.S. is “becoming Japan” (USCO Essentials, February 2016) and (ICO, July 2013).

Expanding this analysis to the rest of the G7, we find that every economy is effectively becoming Japan, and the sharpest slowdowns are happening outside North America. Thus, as trend growth falls in the world’s largest advanced economies amid the ongoing global slowdown, the threat of a global recession is growing.

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The miracle of growth in the US economy

Summary: Let’s look at the four key measures of growth for the US economy. They show the big news about this economic cycle: six years of amazing stable and slow US growth, shrugging off repeated shocks. The latest being the apocalypse of Brexit, so confidently predicted before the UK vote. This has surprised almost everybody, and proven most forecasters wrong. There are important lessons we should learn from this.

Stagnation Snail

Real GDP

Slow growth in real GDP since Q1 2010, with only ½% swings around the average. Each of these swings, up and down, produced almost hysterical commentary. Yet they are small compared to the typical swings seen since WWII. Per capita GDP, a better measure of how well we’re doing, has grown even slower — only 1.8%/year.

Real GDP YoY since 2010

Nonfarm payrolls

Slow and stable job growth in jobs since September 2011, with only ½% swings around the average.

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You need to know 2 things about the June jobs report (neither is often mentioned)

Summary: The jobs report is a monthly gift for journalists and economists. Packed with numbers — mostly noise, with large error bars, subject to big revisions — it generates a flood of clickbait headlines and confident analysis. Lost in this are the important trends we need to know (aka “old news”, because they change slowly). Here are two of the big ones.

The experts will explain that this news is life-changingly significant, every month.

TV noise

June’s job growth was big and important!

No, the June strong headline number is not important. Like May’s horrific slow growth, it’s probably just noise. More important are the 16 months of slowing job growth (i.e., job growth decelerating from the slow grow characteristic of this recovery). In February 2015 YoY growth in non-farm payrolls was 2.3%. In June it was 1.8%. This drop erased the acceleration of Feb 2014 – Feb 2015 that got economists excited about the big Fed rate increases coming really soon. Normal days were coming again! But they’ve been delayed, again.

Employment growth in June 2016 - NSA YoY

Job growth is slow, but it’s still growth!

The number of jobs is not the best metric in the New America, with its growth in part-time, un-unionizable, no benefits, no training, disposable employees. A better (albeit, like all economic data, imperfect) measure is the total number of hours worked per month. For the full recovery it tells the same story as jobs:  slow growth since the crash (jobs are up a total of only 4.4% over nine years, hours are up 5.3%).

But total hours have been flat for the past six months. (total hours for production and non-supervisory workers has been flat for seven months). That’s a red flag. Gaps like this between similar metrics deserve attention, since they signal that something is happening.

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A UK engineer explains: elites oppose Brexit because they import cheap workers

Summary: Why did UK elites have a hysterical reaction to the vote for Brexit? There is not one answer.  Andrew Fentem (engineer, inventor) explains one logical answer: it threatens their supply of cheap workers. Also, I recommend putting The Register on your reading list if you are interested in the IT industry (changing times requires new sources of info).

Fear and Brexit in Tech City:
Digital ‘elite’ are having a nervous breakdown

By Andrew Fentem at The Register (“Biting the hand that feeds IT”).
See the money paragraph in red.

…While some sections of the British press celebrate the Brexit vote in the UK, in the technology press there has been much gnashing of teeth and rending of garments.

Forbes interviewed a clearly traumatised Brent Hoberman – of Lastminute.com fame – who seems to be in need of a reassuring cuddle: “People feeling rejection. I think this is what the Leave campaign underestimated: the psychology of rejecting openness.” Sensitive Brent’s words will no doubt remind “Peep Show” fans of this classic scene {a UK show about 2 omega men.}…

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Preening international elitists like Hoberman are exactly what Brexit voters so dislike. While the self-styled “digital elite” talk in therapy-speak about European peace, love, and understanding, they are masking their true motivation – which is the freedom to exploit low-cost mobile tech labour. Cheap labour was the top reason cited by Tech City startups for voting Remain.

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Ignore the hype. There are few shortages of skilled workers in America.

Summary: The shortage of STEM workers is a zombie myth too politically useful to die. But here’s data that should kill it. Worse, it implies we might soon see a surplus of highly educated workers, undercutting the more education as a solution to automation story. We’ll need to consider more radical ideas.

“While there are over 500,000 computing jobs currently unfilled in the U.S., only 42,969 computer science students graduated from U.S. universities into the workforce last year.”

— “Computer Science in K-12 Classrooms” by the Computer Science Education Coalition, one of the many lobbying groups funded by corporations to ensure cheap labor. Median wages for people with PhDs in computer science were $121,300 in 2013, down 7% from 2008. There is no shortage, even in this hottest of fields.

Wages show the supply & demand for people with Ph.D.s.
Their wages are falling, so there is no shortage.

Data on PhD holders jobs and salaries, from WSJ

For years corporations and their paid propagandists at think-tanks have bombarded us with news about the shortage of workers in the STEM fields (Science, Technology, Engineering and Mathematics), which will cripple America in the 21st century. Looking to the future, we’re told growth in these fields would offset some of the massive unemployment from automation.

Oddly, despite the ludicrously high numbers of unfilled jobs reported, wages in these fields have not been rapidly rising (excerpt in a few hot specialties, as it takes time for students to graduate into them). Has the law of supply and demand been repealed? No, since not only is there no shortage, but even Ph.D.s in these fields are in excess supply and seeking employment in other fields, or at jobs in their field not requiring their level of training.

Worse, the data suggests that in the future we might have an oversuppy of highly educated workers (the large surplus of attorneys might be the exemplar of what’s to come).

What we see here is corporations using the news media and government to ensure an ample supply of cheap skilled workers. An entire movement has been built on this fake story.

Here’s the latest of the articles presenting the facts about higher education in the second decade of the 21st century.

Job-Seeking Ph.D. Holders Look to Life Outside School
by Douglas Belkin in the Wall Street Journal
“New doctorate holders are grappling with dwindling employment prospects.”

“…The percentage of new doctorate recipients without jobs or plans for further study climbed to 39% in 2014 from 31% in 2009, according to a National Science Foundation survey released in April. Median salaries for midcareer Ph.D.s working full time fell 6% between 2010 and 2013.

“The reason: supply and demand. Production of doctorates in the U.S. climbed 28% in the decade ending in 2014 to an all-time high of 54,070. That surge has come as more Americans see a postgraduate degree as a hedge against stagnating wages and unemployment in an economy demanding increasingly specific skills and expertise.

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Why the Fed is excited about US growth. Why they’re wrong.

Summary: After years of disappointment, a happy few retain their optimism about the US economy’s growth — including many of the Fed’s governors, hence their enthusiasm about raising interest rates. Here you’ll see one reason they’re excited, the sad reality behind it, and the logical but dark conclusion.Job Growth

 

Business Insider said “Job openings rise to a record high“. Even more exciting is CNBC, who produces a truly meaningless headline: “JOLTS: 5.8 million job openings in April vs 5.7 million expected” (as if the number “expected” means anything, or the 1.7% difference is significant).

Josh Zumbrun at the WSJ wrote a more accurate analysis: “A Hiring Decline in April Points to Broader Labor Market Woes“, “Fewer people are getting hired despite a high number of job openings and few layoffs.” He describes the puzzle.

“A persistent puzzle in the data: employers report having a record number of job openings available but the hiring rate shows people are not actually being hired into those jobs. That puzzle remained in today’s report. The pace of hiring declined, while the number of jobs available at the end of April climbed to 5.8 million from 5.7 million.”

There is a simple explanation to this important puzzle. But first, see why the optimists are excited: the number of job openings has risen — and now exceeds job hires (from the JOLTS report)! Perhaps this means that the economy is starting to over-heat!  We have labor shortages, so wages must be rising at an accelerating rate — a terrible thing called “wage inflation” (economists’ never speak of “profits inflation”).

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