Jobs, Unemployment And “A Deficit Of Trust”
Yesterday we were told the nation’s employers “unexpectedly” shed more jobs last month than forecast. Today we’re told that despite that, the unemployment rate “surprisingly” decreased to 9.7%.
Unsurprisingly I don’t believe a word of it. Call me a cynic, call me a skeptic, but I just don’t believe much of anything coming out of the government these days (I know, let’s call it a “deficit of trust”). Don’t forget that 9.7% number comes on the heels of a report saying the government forgot to count over 800,000 lost jobs last year.
When the government releases Friday’s unemployment report, nearly a million jobs could be erased. The change won’t show up in the monthly report. Rather, the expected job will show up in the government’s revised job losses from April 2008 to March 2009, showing the labor market was in much worse shape than we knew at the time.
So here we are, rampant and exceedingly high unemployment, no relief in sight and the unicorns and rainbows crowd are spinning the numbers and telling us all is well and getting better.
Well, economic well-being, like is said of politics, is all local. And for the most part, the locals aren’t buying the spin. Here’s the brutal truth:
An unemployment rate that’s projected to average 10 percent this year will likely weigh on consumer spending, preventing the biggest part of the economy from accelerating. Without additional gains in sales, companies will be forced to keep cutting costs, limiting staff in order to boost profits.
“Businesses are simply postponing their hiring for as long as possible,” Richard DeKaser, chief economist at Woodley Park Research in Washington, said before the report. “The willingness to hire is not there.”
Fewer customers, less spending. Less spending, less of a need to make things. Less demand for products means less demand for more employees.
Key line: “Without additional gains in sales, companies will be forced to keep cutting costs, limiting staff in order to boost profits.”
And that’s precisely what they’re doing. The Labor Department reports:
Nonfarm business sector labor productivity increased at a 6.2 percent annual rate during the fourth quarter of 2009, the U.S. Bureau of Labor Statistics reported today. This gain in productivity reflects increases of 7.2 percent in output and 1.0 percent in hours worked. (All quarterly percent changes in this release are seasonally adjusted annual rates.) This was the first quarterly increase in hours worked since the second quarter of 2007 (0.9 percent). Productivity increased 5.1 percent over the last four quarters –more than during any similar period since output per hour rose 6.1 percent from the first quarter of 2001 to the first quarter of 2002.
Even the Riddler could puzzle this one out. Worker productivity has increased 5.1% over the last four quarters. But unemployment has continued to grow. What does that mean? Well it means companies and businesses have found a way to increase production with fewer employees. And that, as the key line above suggests, boosts profits.
Now that productivity increase can come in many ways. Simply distributing the same (or even increased) work load to fewer employees. That’s happening all over the place now. Then, in certain industries, automation replaces employees (it doesn’t require health insurance, vacation days, a 401k and isn’t represented by a union). And in some places it’s a combination of both plus modified business models.
The bottom line is there’s not likely to be that much hiring if and when the economy actually turns around unless a huge increase in demand is realized. And even then, employers are likely to try to hold out as long as possible, given their productivity gains, until those productivity gains are neutralized. I’m sure there’s a tremendous gap between now and that point. Then add in the market instability brought on by pending legislation like health care reform and cap-and-trade, and you can see high unemployment in the future for quite some time.
But the unicorn and rainbow crowd are going to tell you everything, relatively speaking, is getting better. The fact that your relatives are all unemployed and your job isn’t looking so hot at the moment either will cause you to doubt their assertions. Do. Doubt them I mean. They’re as full of crap as a Christmas goose. And that’s becoming more and more obvious each day as we watch this dance of the dodgers continue. Because, you know, you can’t handle the truth. No, that’s not true. If they tell you the truth, they too will be unemployed.
“Deficit of trust?”
A true understatement.