A picture is worth a thousand words.
So, here’s a picture.
Nice piece in today’s WSJ … here are snippets:
Punch line: Productivity — the ultimate engine of growth and better living standards — always swims upstream against those that fight it. Unions, regulations and a bizarre tax code lock in the status quo.
But, doesn’t productivity — getting more output with less inputs — destroy jobs?
Sure, but it creates way more than it destroys by creating technological avenues and lowering the cost of business
So how does productivity result in more employment?
Some new technology comes along that allows something never before possible. Cash from an ATM, stock trading from an airplane’s aisle seat, ads next to Google search results.
Cheaper technology becomes a platform for others to create or expand businesses that never before made economic sense. Think, eBay and Amazon.
Productivity attracts capital to satisfy new consumer demands. In a competitive economy, productivity—doing more with less—always lowers the cost of products or services:
And, private investment does a better job of allocating capital than any elite economist or politician picking pork-barrel projects and relabeling them as “investments.”
Entire WSJ article is worth reading
Last week, we were fast out of the blocks posting about the drop in the labor force participation rate: How to make 11% unemployment look like 8.1%
The essential points raised:
Here’s the money chart from last week’s post:
* * * * *
The long view
Some analysts have seized on the fact that 324,000 Women Dropped Out of Labor Force in Last Two Months.
Are women really leaving the labor force in droves? ?
Let’s start with the long view:
Back in 1960, women’s labor force participation rate was below 40%.
Over the next 40 years, it bumped up about a point a year, hitting 60% in 2000.
The demographics are well known. More women chose to pursue careers and some families needed 2-wage earners in the family in order to make financial ends meet.
* * * * *
The Shorter View
But, the long view masks what’s been happening the past couple of years.
Let’s shorten the time frame back to only 1990, and increase the granularity of the charting scale.
During the Clinton Era, women’s labor force participation rates continued to climb at the historical rate and reached a historical peak a bit above 60%
The participation rate fell back slightly during the eight Bush years … from 60% to about 59.5%
During the 3+ years since Obama’s inauguration, the women’s labor force participation rate dropped 2 points from 59.5 to 57.5%
* * * * *
So, what’s going on?
Pundits are serving up a few explanations:
1. The labor market has absorbed the historically pent up supply of women wanting to work and able to find jobs.
2. Some women have discovered what many me have know for centuries – work often isn’t as fulfilling and rewarding as it’s made out to be.
3. Some women have done the math and figured out that compensation levels are sometimes inadequate to fully cover the costs of work clothes, commuting, child care, etc.
4. As government benefits have increased, some women at the lower rungs of the economic ladder have concluded that they’re better off not employed than to take a low paying job.
Regarding the last pint, according to the WSJ, in some high-benefit states women need to earn $30,000 or more to compensate for the benefits they lose if they get a job.
Considering that a full-time minimum wage job only pays about $20,000 [ 2,000 hours times $10} … at least part of the explanation for declining labor force participation rates may be purely rational economics …
A couple of data points …
The BLS weekly new unemployment claims averaged 363,000 in March … they’ve been just short of 390,000 the past couple of weeks.
* * * * *
Challenger reported an increase in job cuts — vs. last month and vs. same month last year.
U.S.-based employers announced planned job cuts totaling 40,559 during the month of April.
That is a 7.1 percent increase from job cuts announced in March.
April job cuts were up 11.2 percent from the same month a year ago.
So far this year, employers have announced 183,653 job cuts, 9.8 percent more than the job cuts by this point in 2011.
* * * * *
Gallup’s daily tracking of unemployment has been running between 8.3% and 8.4% for the past week or so.
* * * * *
Yesterday, ADP reported that the private sector added just 119,000 jobs in April
Private-sector employment increased by just 119,000 in April, according a report from ADP that puts a dent into the notion that the jobs market is on the path to a solid recovery.
The report was well below forecasts of 170,000 and comes after a string of stronger numbers.
ADP said service-sector jobs rose by 123,000, but construction fell by 5,000
* * * * *
Let’s see: unemployment claims are up, Gallup says 8.4%, ADP reports a slowing of job growth (below what’s need to keep pace with typical labor market growth).
So, what’ll be the BLS unemployment number?
My bet: the mysterious seasonal adjustments coupled with more discouraged workers no longer looking for work will keep the unemployment rate at 8.2%
Way back in July 2009, we posted “Private sector jobs won’t be coming back any time soon”
Our logic was basic business:
First, you can’t let a good crisis go to waste, right?
Businesses always use tough economic times to clean house.
Fat builds in all organizations over time. In “normal” times, it’s difficult to get rid of dead wood. Employment laws – perhaps well-intended originally –- serve to protect slackers by making it cumbersome and difficult to fire anybody.
When the economic tide rolls out, companies have the air cover they need to resize and purge under-performers en masse.
The tendency is to cut deep. If some muscle gets pared too, so be it. It can be rehabilitated later.
In typical business cycles, employment is a so-called lagging indicator of an economic rebound. That is, when the economy starts to recover, jobs are usually added back very slowly.
Because businesses have a renewed zeal for productivity, they recommit to keeping the fat from building up again, and they want to be sure that the signs of better economic times aren’t false positives.
Fewer jobs will get added back than history would suggest, and those that get added back will materialize later than past patterns.
Businesses will add jobs as a last resort rather than trying to build capacity ahead of the economic growth curve.
Well, the WSJ has confirmed our prognosis in an article titled: Large Corporations Emerge from Recession Leaner, Stronger—and Hiring Overseas
Overall, the Journal found that S&P 500 companies have become more efficient — and more productive.
In 2007, the companies generated an average of $378,000 in revenue for every employee on their payrolls. Last year, that figure rose to $420,000
Such efficiency moves are essential for companies to be competitive.
But economists warn that improved efficiency and continued executive caution are slowing the recovery.
“What’s best for an individual firm may not be best for the overall economy,”
Yeah, but, you just can’t let a good crisis go to waste …
Punch Line: Businesses are giving employees the opportunity to work in a different department or temporarily swap places with a coworkers overseas in order to improve collaboration and retention.
* * * * *
Excerpt from WSJ: “Co-Workers Change Places”
Companies are discovering that short- to medium-term moves for rank-and-file employees help workers sharpen their skills, stay motivated and identify new roles. Moreover, they help address a challenge: how to better foster collaboration across different specialties and regions.
At Intel employees search an internal database with hundreds of job listings. These assignments allow workers “to test-drive a job or make connections in different departments.”
At Virgin America, a handful of flight attendants recently traded places with colleagues at Virgin Australia.
Skills-based rotations are more valuable than swaps that are purely geographic. While a program like Virgin’s offers employees some short-term benefits, it may have less impact on a company’s overall effectiveness.
Global exchanges can be a valuable retention tool for multinational companies.
Edited by ARK
TakeAway: Companies are using online job fairs to save costs and time while providing job searchers with information about the companies and positions available.
* * * * *
Excerpt from WSJ: “Virtual Fairs Offer Real Jobs”
Companies are turning to virtual career fairs. Employers say these online forums — accessed by companies and job seekers from anywhere in the world — can save them time and money, as well as broaden the candidate pool.
Candidates learn about fairs through the company’s website, social-networking services such as Facebook and Twitter, or word of mouth.
Procter & Gamble and Citigroup customize their own company-specific virtual career fairs. Other firms join broad-based virtual career fairs hosted by companies like jobs sites Monster.com. The group fairs host anywhere from a handful to hundreds of companies.
The fairs are less about landing a job offer, say HR experts, and more about generating interest among candidates.
Lourdes Fuentes, a marketing executive with P&G, says the virtual fair is cost- and time-efficient because she can access it from her office and doesn’t have to spend a full day traveling.
Edit by ARK
In one of the many tribute pieces to Steve Jobs, Business Week published a note from John Sculley.
A couple of lines caught my eye …
On PLC management:
When I first joined Apple, my priority was to squeeze three more years of cash flow out of the near-end-of-life Apple II so Steve would have enough cash runway to create and launch the Mac.
Simplify, simplify, simplify
Steve would say the hardest decisions are what to leave out, not what to put in.
He was the ultimate systems designer.
Everything began and ended with the user experience.
Simplify the steps. “Look, we can do it in three steps. … Not good enough, do it in one step.”
The master impresario:
The advances in technology over these years are extraordinary, but Steve wasn’t an engineer.
As an artist he barely drew anything recognizable on his white board.
But as a master impresario, the clarity and brilliance of his creations was genius.
Great companies, noble causes
Great companies must have a noble cause.
Then it’s the leader’s job to transform that noble cause into such an inspiring vision that it will attract the most talented people in the world to want to join it.
I guess I shouldn’t be poking fun at this one, but I can’t resist …
First, the facts:
Excerpted from WSJ : Starbucks Pushes to Create Jobs
Starbucks CEO Howard Schultz, who has been on a mission to cut the national debt and boost job creation, has pledged to donate at least $100,000 of profits annually to boost jobs in low-income areas
Profits from Starbucks stores in the Harlem section of Manhattan and the Crenshaw neighborhood of Los Angeles will go toward two community organizations that work to improve education and job training for young adults in those areas.
High-school students in those neighborhoods also will receive barista training at the Starbucks shops.
1) $100,000 ??? Come on Howard, that’s the equivalent of about 50 lattes per day … if you’re going to step-up, then STEP-UP !
2) Can’t you just imagine the reaction of the neighborhood kids … “Hot damn, dreams come true, I can be a Barista”
Punch line: Part of the formula for getting the economy moving is to have a new industry emerge – or have a latent one take-off.
Obama tried with his failed green energy initiatives.
Now, there’s increasing support for for turning the domestic oil, gas and coal industries loose.
Makes sense to me.
And, makes sense to Senators Webb & Warner who have introduced a bill that would expand oil drilling off the shores of Virginia … and split the royalty fees between the Feds and the state.
Their argument: raises revenues without raising individuals’ taxes, reduces dependency on foreign oil, potentially reduces – or at least contains – gas prices, and – oh yeah – adds jobs.
Keep reading …
* * * * *
Excerpted from Forbes: Gassing Up: Why America’s Future Job Growth Lies In Traditional Energy Industries
The Praxis Strategy Group looked over data for the period after the economy started to weaken in 2006.
Not surprisingly “recession-proof” fields such as health care and education expanded some 11% over the past five years.
But the biggest growth in jobs by far has taken place in the mining, oil and natural gas industries, where jobs expanded by 60%, creating a total of 500,000 new jobs.
The average job in conventional energy pays about $100,000 annually — more than twice as high as those in either health or education.
Overall U.S. oil production has grown by 10% since 2008; the import share of U.S. oil consumption has dropped to 47% from 60% in 2005.
Over the next year, according to one recent industry-funded study, oil and gas could create an additional 1.5 million new jobs.
The relative strength of the energy sector can be seen in changes in income by region over the past decade. For the most part, the largest gains have been heavily concentrated in the energy belt between the Dakotas and the Gulf of Mexico.
Energy-oriented metropolitan economies such as Houston, Dallas, Bismarck and Oklahoma City have also fared relatively well.
In energy-rich North Dakota there’s actually a huge labor shortage, reaching over 17,000 — one likely to get worse if production expands, as now proposed, from 6000 to over 30,000 wells over the next decade.
With the proper environmental controls, these industries could provide a major jolt to the economy while cutting down on energy imports, reducing debts and bringing jobs back home.
As long as Americans consume oil and gas, why not produce close to the market and with reasonable environmental controls?
Last week, Speaker Boehner spoke about the Obama’s Jobs Plan and the state of the economy”
House Speaker John Boehner said President Barack Obama’s jobs plan would do little to get the economy moving again because “job creators in America are basically on strike.” Source
Well, we told so … going back to a July 2009 post titled: “Why private sector jobs won’t be coming back any time soon … hint: it’s called passive aggressive resistance.”
Back then, we were saying:
The bottom line: businesses will resist government policies passive aggressively.
Fewer jobs will get added back than history would suggest, and those that get added back will materialize later than past patterns. Businesses will add jobs as a last resort rather than trying to build capacity ahead of the economic growth curve.
Why should companies increase their costs and risks any more than is absolutely necessary ?
Companies will continue to off-shore jobs, but will be more clever and clandestine about it, e.g. by vertically disintegrating and simply buying goods and services from 3rd parties.
Given the Administration’s anti-corporate rhetoric, actions, and proposed game-changing rules, I doubt that many CEOs will be taking on added costs and risks to boost the administration.
More likely, they will let unemployment continue to creep up, and will slow roll the process of rehiring.
Corporate chieftains will sit back and watch the President squirm and spin his “4 million jobs – saved or created”.
As Rev. Wright would say “the chickens will have come home to roost”.
Passively aggressive resistance at its very best.
There’s more in the original post.
Punch line: Along with Obama’s Son-of-Stimulus comes a provision to prohibit discrimination based on a job applicant’s unemployment status … that is, whether they are currently unemployed or have had gaps in their work record.
Excerpted from Wash Post: “Bill to protect unemployed job applicants could hurt employers”
With no more pressing priority in Congress than creating jobs, the House and the Senate recently proposed near-identical versions of the Fair Employment Opportunity Act of 2011 to prohibit discrimination based on a job applicant’s unemployment status.
The proposals prohibit considering the present or past unemployment of employee candidates.
And, the proposals severely restrict an employer from inquiring into gaps in the work history of employee candidates — standard fare for any job interview.
Certainly, in a bad economy there are millions of Americans who are unemployed through no fault of their own.
But in good and even troubled economic times, long bouts of unemployment may bespeak a bad work ethic or some other improper behavior — a legitimate consideration for any employer.
Simply put, the potential unintended consequences of Congress’s proposal may exacerbate the disease that members of Congress so desperately seek to cure.
You just can’t make this stuff up …