Saturday, September 6, 2014
Random ruminations from your resident curmudgeon...
On Friday, the Bureau of Labor Statistics released the jobs report that details how many new jobs were created in the economy last month. Many "experts" predicted that jobs growth would be at a minimum of 190,000 to a high of 242,000 new jobs created.
These experts were no where near close to the actual number, which was 142,000 new jobs created.
While this number will be revised in the coming weeks, it underscores the fact that our economy is weak and struggling to create jobs, irrespective of the performance of the stock market.
Dig deeper into the numbers and you begin to see how weak job growth is in this current environment.
The civilian labor force participation rate, which is the number of working age Americans that actually have full time jobs, stands at 62.8% of eligible potential workers. This is the lowest rate since 1979, a year in which this country was in the middle of the malaise of the Jimmy Carter presidency. Currently, 92,269,000 working age Americans are out of the work force, up 268,000 from last month.
Put it another way, since the end of 2007 when the markets crashed and the Fed started printing money, the U.S. economy has added 13 million people to the ranks of those without a job.
Over the same period, the U.S. economy has created 768,000 new jobs.
That's a serious problem.
And while we need the economy to create jobs, just as important is the quality of jobs that the economy creates. High quality jobs are jobs with good wages and benefits that allow a worker to support their family and have the ability to spend beyond the basic necessities.
And here we have a really serious problem.
Just under half of the 142,000 jobs created last month were in the industries that have the lowest pay: leisure and hospitality; education and health; and temporary jobs. The best paying industries- finance and technology, added just 4,000 jobs.
And the long time staple of the U.S. economy, manufacturing, added exactly 0 (ZERO) jobs last month.
Of those that are classified as employed, 52 million are considered "freelancers", or independent contractors, according to an analysis by the Wall Street Journal. These "employed" move from job to job on a contract basis with no benefits and no guarantee of future work.
Why is all this important?
Our economy will not grow and consumers will not spend beyond the necessities when we as a nation do not create high quality jobs that pay well. And when consumers don't spend, our economy contracts. And when the economy contracts, consumers don't spend as much.
And the downward spiral continues.
Higher personal and business taxes, the burden of Obamacare, the failure of our public education system to turn out graduates equipped to function effectively in the global economy, and the ineptness of the Federal Reserve and our leadership in Washington have all combined to create significant headwinds for the economy. It is more difficult in today's environment to create jobs, especially quality, high paying jobs.
And until the current conditions change, it will be difficult for the job creators to have the confidence to invest capital in new hires and for the economy to begin adding quality jobs.
And no amount of new dollars printed by the Fed and zero interest rates will change that lack of confidence.
And that, my friends, is my view.