U.S. Jobs Growth Hits Wall

Tough to sugarcoat this, so I won’t. Here’s an article on jobs growth in the United States and it’s not super encouraging. And according to Erick Erickson of RedState.com, this is the first time the U.S. economy has created net zero jobs since World War II. Will be interesting to see what President Obama says when he addresses Congress next Thursday.

U.S. employment growth ground to a halt in August as sagging confidence discouraged already skittish businesses from hiring, keeping pressure on the Federal Reserve to provide more stimulus to aid the economy.

Nonfarm payrolls were unchanged, the Labor Department said on Friday, the weakest reading since September. Economists had expected a gain of 75,000 jobs. The report underscored the frail economy and kept fears of a recession on investors’ radar.

"The economy is slowly grinding to a halt. The problem, however, on the policy side is that I wonder whether the numbers are truly weak enough to galvanize a political response," said Steve Blitz, senior economist at ITG in New York.

U.S. stock index futures extended losses on the data, while Treasury debt prices rose. The dollar extended losses against the Swiss franc, but rose against the euro.

Adding to the weak tenor of the report, nonfarm employment for June and July was revised to show 58,000 fewer jobs.

The average workweek dropped to 34.2 hours, the fewest since January, from 34.3 hours. Average hourly earnings fell three cents.

Despite the lack of employment growth, the jobless rate held steady at 9.1 percent. The unemployment rate is derived from a separate survey of households, which showed an increase in employment and a tick up in the labor force participation rate.

A strike by about 45,000 Verizon Communications workers helped push employment in the information services down by 48,000.

An acrimonious political fight over U.S. debt, which culminated in the downgrade of the country’s AAA credit rating from Standard & Poor’s, and a worsening debt crisis in Europe ignited a massive stock market sell-off last month and sent business and consumer confidence tumbling.

With the unemployment rate stuck above 9 percent and confidence collapsing, President Barack Obama is under pressure to come up with ways to spur job creation. The health of the labor market could determine whether he wins a second term in next year’s elections.

Obama will lay out a new jobs plan in a speech to the nation on Thursday.

The weak employment data could strengthen the hand of officials at the U.S. central bank, who were ready at their August meeting to do more to help the sputtering economy.

The Fed cut overnight interest rates to near zero in December 2008 and it has bought $2.3 trillion in securities. Many analysts say its arsenal is now largely depleted, although they expect it to do more to try to prop up growth.

Sign of the Times: Man With 20 Years of Experience Hopes Sign Will Get Notice

Bob Gross of Westfield has been without a steady job since 2009, when he was let go from his position as a system analyst. Far from a greenhorn, Gross had cultivated 20 years of experience in his field. Now he brandishes a sign and a smile in downtown Indy in an effort to hopefully get some exposure. WRTV6 News has his story — with a link to his resume (so give him a call if you’re hiring):

A central Indiana man who has been unemployed since 2009 is undertaking some rather unconventional methods to try to land a professional job.

Bob Gross, of Westfield, has been carrying a sign in highly trafficked areas of Indianapolis for about two weeks, hoping to get a job in the finance and accounting field, 6News’ Ebone Monet reported.

On Thursday, Gross was hanging out with a large sign at Illinois and Market streets in hopes that someone passing by would be willing to give him a chance.

Gross, a father of two girls, was laid off from Delphi Corp., where he was a system analyst, in 2009. Aside from a brief contracting stint in January 2010, he’s been without a job ever since.

"My heart sunk. When my boss came up to me and said he needed to see me, I knew at that time that I was gone," Gross said. "You’re in a state of shock. You can’t believe it’s happening to you."

Gross has a business administration and management degree from Indiana University and had worked for Delphi/Delco Electronics for 20 years.

He said he has applied for up to 1,500 positions at numerous companies all over the Midwest and the East Coast, but that conventional means just weren’t working for him.

"I’ve interviewed several times, but I haven’t been offered a position," he said. "I had to do something. The Internet way wasn’t working for me. So, I thought I’d do something creative. I’m a little bold and gutsy."

The job hunt became more urgent for Gross when his wife was laid off two months ago, leaving the family without insurance coverage. He is set to run out of employment benefits at the end of the year.

McKinsey Report Highlights Task Ahead for U.S. Workforce

A new report from the McKinsey Global Institute projects a daunting task ahead for the U.S. economy: create 21 million jobs by 2020. Oh, and in the near term, we also still need to get 7 million people back to work who are victims of the 2008-09 recession. Chief among possible solutions will be adequate training our workforce to fill vacant jobs in the future. That’s likely why Kris Deckard, executive director of Ready Indiana, was interviewed for the report.

McKinsey relays:

The research analyzes the causes of slow job creation in the period before the recession and during the recovery and the implications of these forces for future job growth. The research projects how the US labor force will evolve over the next ten years and creates different scenarios for job growth based on extensive analysis of sector trends. MGI’s central finding is that a return to full employment will occur in only the most optimistic job growth scenario. This will require not only a robust economic recovery, but also a concerted effort to address other factors that impede employment, including growing gaps in skill and education.

The report offers a range of illustrative solutions based on lessons from US states and other countries that MGI hopes will add to the national conversation on jobs. Findings include:

Recoveries are increasingly becoming "jobless" due to firm restructuring, skill and geographic mismatches between workers and jobs, and sharp decline in new start-ups.

The US needs to create 21 million new jobs by 2020 to regain full employment – and only achieves this in our most optimistic job growth scenario.

The US workforce will continue to grow until 2020, but under current trends, many workers will not have the right skills for the available jobs. Technology is changing the nature of work: jobs are being disaggregated into tasks, work is becoming virtual, and firms are relying on flexible labor (temporary, contract workers). These trends offer new opportunities for creating jobs in the United States, a trend that some companies do not fully appreciate.

Progress on four dimensions will be essential for reviving the US job creation machine: develop the US workforces’ skill to better match what employers are looking for; expand US workers’ share of global economic growth by attracting foreign investment and spurring exports; revive the nation’s spark by supporting emerging industries, ensuring more of them scale up in the United States, and reviving new business start-ups; and speed up regulatory decision-making that blocks business expansion and new investment.

Also view the executive summary and full report.

Men Seeing Unemployment Turnaround Following Recession

The term “man-cession” is foreign to me. I had no idea that’s what someone has dubbed the recent economic recession. Even though it’s kind of a silly term, when looking at the unemployment numbers from the recession, it does seem to make sense.

Let me explain: As a casual observer of world and national news, I understood how the recession affected millions. What I didn’t realize, however, was how unemployment among men jumped during the recession – much more than it did with women.

It turns out that employment among men plummeted by more than 5.2 million between November 2007 and December 2009, due of course, to losses in male-dominated industries, such as construction, manufacturing and financial services. Employment among women only dropped 1.9 million during the same time period. Those statistics are courtesy of Challenger, Gray & Christmas, Inc. with data provided by the U.S. Bureau of Labor Statistics.

The good news for guys is that the economic recovery is favoring their gender – since January 2010, male employment has increased by 1.7 million. For women, employment has only grown by about 365,000 in the same time frame. Over the past year, the number of employed women has actually fallen by about 85,000, whereas 686,000 males have gotten jobs.

There’s still a long way to go for the male employment sector, however – unemployment is at 8.9%, more than twice the 4.2% it was before the recession hit.

While the numbers might point to a “man-cession” of sorts, we can’t forget that women still only earn about 78 cents to the dollar that men earn. So, while more women might have kept their jobs during the recession, those jobs are lower-paying than many of the jobs that were lost in the male-dominated sectors.

I can’t see “man-cession” turning up in my every day vocabulary; more than likely I’ll just stick by the old standard recession and hope that a continued recovery happens as quickly as possible.

Why Stock Markets Rise While Economy Struggles

Like me, many of you may wonder how the stock market can rise while an economy continues to slump. And, also like me, some of you may wonder if NBC thinks you’re a fool — switching the actresses playing the mom on "The Fresh Prince of Bel-Air" with hardly a satisfactory explanation.

Well, Steven Dolvin, associate finance professor at Butler University, at least tackles the first question in a recent column for Inside INdiana Business.

Consider: Unemployment is still high (9.1 percent in May 2011). The depressed housing market is the most undervalued it’s been in 35 years (according to Capital Economics), with foreclosures expected to jump 20 percent from 2010. According to Gallup poll data, average daily consumer spending has declined 39 percent since May 2008.

Meanwhile, since March 2009, the stock market has basically doubled from its lows. Is this a disconnect with reality?

Not necessarily. Studying data from the 2011 Indiana CEO Survey indicates three reasons why the stock market has risen while the economy continues to struggle:

Companies serve global markets. The survey shows what business issues are important to the Indiana CEOs. While several, such as health care costs, employee retention and recruitment, and consistent execution of business strategy have remained flat in terms of importance, “growing the business internationally” has grown in importance. After slipping in 2008 and 2010 as CEOs focused on keeping their businesses afloat, this issue has increased in importance to its 2007 level.

The larger the company, the greater its international focus. For businesses in the S&P 500 Index, more than half their revenue typically comes from outside the United States. Some receive 80 to 90 percent of their revenue from outside our borders. While this international focus keeps their bottom line strong and their shareholders happy, it doesn’t necessarily translate into money spent in the U.S., helping our economy.

Job growth is a lagging metric. The Indiana CEOs were asked if they were going to reduce or add jobs. The survey indicates what you’d expect in a tough economy and recovery: After the recession hit, the likelihood of reducing jobs rose from 2007 to 2009 before beginning to decline. Meanwhile, the likelihood of adding jobs declined steeply from 2007 to 2009, before beginning to increase.

While the likelihood of more hiring has increased, actual hiring hasn’t yet. Actual job growth lags behind the stock market, which tends to be a forward-looking metric. People make investments based on what they think will happen, rather than what’s happening now. That’s why, in terms of job creation as a component of business performance, the stock market anticipates a rosier picture than current reality.

Trickle down takes time. In the survey, the Indiana CEOs said they believe there is more public and private funding available for business success, compared to last year. They say the amount of funding has increased on both the equity and debt sides since the recession. As funding increases, companies can leverage their positions more. This translates to better returns, which leads to happier shareholders. On this idea of more money = more profits, the stock market rises.

BSU Economist: U.S. Jobs Boost in March a Sign of Recovery

It’s no secret things have hardly been rosy in the U.S., or the world for that matter, when it comes to economic progress in the past two years. But Ball State University economist Michael Hicks sees light at the end of the proverbial tunnel, citing American job growth in March as a key indicator. A recent release from BSU asserts:

Reports that the American economy added about 216,000 jobs in March is solid evidence that a recovery is taking hold, says economist Michael Hicks, director of Ball State’s Center for Business and Economic Research.

The U.S. Department of Labor announced this morning that businesses created 216,000 jobs last month, after adding 192,000 jobs in February. The past two months mark the fastest two-month pace of job creation since before the recession began. Factories, retailers, education, health care and an array of professional and financial services expanded payrolls.

"But it will take about two years with job growth at double this rate to nudge the unemployment rate back down toward the 5.5 percent level that might be the new normal," Hicks says. "The March numbers do indicate that the 50 cent run-up in gas prices hasn’t yet turned the economy backward, but most certainly, job growth would’ve been stronger at $3 a gallon prices.

These Aren’t Your Grandfather’s Unemployment Levels

We need a new mindset around unemployment. If that’s not evident by the stagnant numbers reported each month at the national and state levels, here’s some analysis to back it up.

With each succeeding economic downturn, it takes longer — much longer — to return to pre-recession employment levels. The numbers:

  • July 1981-November 1982 recession: employment returned to pre-recession levels 24 months later
  • July 1990-March 1991: 36 month lag
  • March 2001-November 2001: 72 month lag

If the above trend continues, it could be 2017 or so before "full" employment returns. That doesn’t take into consideration technology and other factors that are making it possible to do more with less. While the last decade has brought the realization that 4% unemployment is as low as it was going to go, the reality going forward might be 5.5%, 6% or even higher.

Add in another factor — the growing number of unemployed that may never escape that designation. Kiplinger is reporting that more than 4.3 million Americans have been unemployed for over a year. It’s not just those involved in manufacturing, either; many in service industries and an increasing number of college graduates find themselves unable to find that next job.

It’s a phenomenon that feeds upon itself. Those who have been unemployed the longest have a more difficult time trying to prove themselves to potential new employers. They are penalized by the fact that they have not worked recently, making them less employable. In turn, this curtails consumer spending and pressures government to add jobless benefits and other programs that support those in need.

Experts have talked about a "new norm" when it comes to employment levels. But what that norm is and its many widespread impacts are critical elements that must be thoroughly addressed. In other words, we need a lot of smart people to come together to craft some solutions.

Numbering the Jobs Situation

We hear the unemployment rate each month, but here are a few other numbers to look at in regard to the economy and jobs:

  • Bad news: 8.5 million or so jobs lost in the recession, with more than 40% of those people out of work for more than six months (in 1983 that figure only got as high as 26%)
  • Better news: While January of this year saw a decline of 20,000 jobs, that paled to nearly 800,000 jobs lost in the same month a year ago
  • Interesting statistic: Many people forget about the job churn that constantly takes place within companies, industries or the economy as a whole. In the second quarter of 2009, 6.4 million people found jobs, but 8 million lost their positions

They’re not all coming back, but bad and better will give way to good and great eventually.

Ball State Economist: Recession is Over

I would file this under "bold statement," although we all hope it’s true:

Michael Hicks, director of Ball State’s Center for Business and Economic Research (CBER), says today’s announcement that the economy grew by an astounding 5.7 percent in the fourth quarter of 2009 officially shuts the door on the recession.

The first estimate by the U.S. Commerce Department put fourth-quarter gross domestic product growth at its fastest pace since the third quarter of 2003. Hicks said the recession that began in late 2008 will be ranked the third or fourth worst post-World War II economic setback.

However, he points out the decline in wealth in homes and stocks was the worst since the Great Depression.

"The down side is that the third quarter annual growth rate of 2.2 percent, was disappointingly low coming out of such a deep recession," Hicks says. "While today’s numbers are good, they may well be revised downward significantly as we saw for the previous quarter."

"While this has not been the worst postwar recession, the recovery may well be. I’m expecting it to be late summer before we see the unemployment rate to show any permanent decline. Real job creation won’t materialize until nearer the retail holiday season later this year."

Experts Predict Slow Jobs Recovery for 2010

When it comes to the employment outlook, the private sector name to know is Challenger, Gray & Christmas. The Chicago-based outplacement and consulting firm offers this look ahead for the 2010 job market. The overview: positive news but tempered with a great deal of caution.

After starting the year with the heaviest downsizing in nearly a decade, the number of announced job cuts declined dramatically in the second half of 2009, providing hope for an eventual job-market turnaround.  The turnaround should become more evident in 2010, as job creation finally begins to outpace job losses.

However, while hiring is expected to accelerate in the new year, unemployment could remain stubbornly high, as millions of Americans who abandoned the job search out of frustration – and, therefore, not counted among the unemployed – reenter the labor pool. 

The economy is just beginning to pull out of the worst economic downturn in decades.  Since the recession began in December 2007, employers have announced nearly 2.5 million job cuts.  The heaviest downsizing occurred between July 2008 and June 2009, with more than 1.6 million job cuts announced.

Job cuts appear to have peaked in January 2009, reaching 241,729, the highest monthly total since January 2002.  In the months to follow, announced layoffs steadily declined, but the monthly average remained above 130,000 through the first half of the year.  Since July 1, however, monthly job-cut announcements have averaged about 69,000.  In November, job cuts fell to 50,349, the lowest monthly total since December 2007. 

“The end of the year is typically when we see a surge in layoff activity.  The fact that job cuts continued to decline in the fourth quarter is a good sign that the job market has truly started the recovery process.  Unfortunately, the recovery process is slow, so it could be several months or even years before unemployment returns to pre-recession levels,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

There were approximately 15.4 million unemployed Americans in November, up from 7.2 million in November 2007, just before the recession began.  In addition to the unemployed, there were 6.0 million Americans in November who want a job but were not considered part of the labor force because they had not sought employment for at least four weeks.  That figure is up from 4.2 million in November 2007.

According to Challenger, some of the areas that will begin to see renewed job creation in the new year include health care, information technology, government, financial services and energy.