The latest employment numbers came out Friday, and I am delighted to see that some manufacturers and service providers are beginning to hire again. The following chart, from “Chart of the Day,” gives some valuable perspective on what we might expect as / if we have passed the worst of it and we are slowly beginning to carve out a bottom.
It compares job losses following the last recession (the dashed gold line) and the average of all recessions from 1950-1999 (the dashed blue line) with the current recession (the solid red line.) A picture is worth a thousand words and this one shows just how severe the current loss of jobs has been – more than three times the decline of the average recession job losses. It also demonstrates that, typically, the decline in jobs do not have a V-shaped recovery, instead flattening in a tug-of-war before moving back into an expansionary phase.
Prior to their release, forecasts were all over the board, from estimates of 100,000 jobs to as high as 300,000. While I am ecstatic to see the usual flattening out here, I am disturbed by one aspect of the report. That is its incongruity with the report two days earlier from ADP, which showed a loss of 23,000 jobs in the private sector. One thing is for sure…
Who’s hiring? Government.
48,000 temporary census-taker jobs were created in March, with another 50,000 slated for April. The government should be able to keep hiring – even though these temp workers will all be laid off by the end of 2011 – at least through October / November. I’m just not sure government jobs are the way to keep the economy moving.
A few years back, when I moved from being the Western US Regional VP of branch offices to a higher position at the corporate level, I had to regularly remind my team at the home office that we were overhead, the branches were revenue. Our job was to support their efforts to generate revenue, not to compete with them for share of corporate budget, the best employees, etc. I think it’s the same with government and private industry.
Just like the big-company world, the branches – private employers – are raided regularly to bring the best and the brightest “closer to the flagpole.” And just as in the corporate world, big government can / does typically offer more in salaries, benefits, vacation time, sick time, bonuses, perks and pensions than private industry can afford to pay in order to attract quality workers.
As an example, just take a look at the Top 10 employers in the city of Chicago. I use Chicago for a reason. I used to live there. I was transferred there in the dead of winter to run what was then the largest branch office of Charles Schwab and Co (NYSE:SCHW). I found the employees hard-working and hard-partying. Chicago truly was, as Carl Sandburg wrote in his paean to the city:
Hog Butcher for the World,
Tool Maker, Stacker of Wheat,
Player with Railroads and the Nation's Freight Handler;
Stormy, husky, brawling,
City of the Big Shoulders
That was then. This is now. My hard-working, hard-playing staff, the sons and daughters of hog butchers, tool makers, and players with railroads may still be the same – but it looks as if their kids are now mostly working for the government – quite a flip-flop in less than 30 years. Here is the latest list from Crain’s Chicago Business of the top ten employers in the city of Chicago and environs:
- U.S. Government
- Chicago Public Schools
- City of Chicago
- State of Illinois
- Cook County
- Wal-Mart Stores (NYSE:WMT)
- Advocate Health Care
- Walgreen Co. (NYSE:WAG)
- J.P. Morgan Chase (NYSE:JPM)
- Abbott Laboratories (NYSE:ABT)
The US government alone employs more people in Chicago than the 5 private employers ranked numbers 6 through 10 combined. How many groceries, sundries or clothes does the government sell at a profit, a la Wal-Mart (WMT)? How many doctors, nurses, and hospitals does it provide a la Advocate Health? How many prescriptions does it fill, again at a profit, like Walgreen (WAG)? How many people bank with it, like at Chase (JPM) or breakthrough wonder drugs has it developed, like Abbott Labs (ABT)?
What’s happening in Chicago may help explain why politicians who came up through the Chicago machine think all blessings flow from government or that government is the solution to all our woes. After all, who gave them the jobs that provided their income and happiness? Most likely the Chicago school system or Cook County or Illinois or the city of Chicago. It should be no surprise they come out of this milieu believing the way money is “earned” is by writing grants better than the next guy and waiting for “the government” to give them money for their latest project.
That is not to disparage anyone who understandably takes the best job they can find, which, with “best” defined as highest-paying and most secure with most benefits for a defined level of work -- which often means a government job. But all too often The System grinds them down. Government at the most local level can be responsive to local issues. The farther away government is, the more likely it cannot stay abreast of disparate local issues – yet that doesn’t stop them from making edicts that affect the lives of millions adversely.
When you and I need money, we work hard to earn it. When the federal government needs money they print it. When you and I need more money, we work more hours, take a second job, attend night school, or cut back on our expenses. When government needs more money, they tax us for more for working harder -- and print more money.
Now -- who isn’t hiring? Well, big business, small business, and entrepreneurs all stepped up in March – just not enough to absorb all the new entrants to the job markets. 398,000 new workers entered the labor force, while 114,000 non-census-taker jobs were created. This leaves the unemployment rate for teen workers unchanged at 26%, with another class of high-school-graduate job seekers set to hit us in May and June. From the BLS:
"The number of long-term unemployed (those jobless for 27 weeks and over) increased by 414,000 over the month.” And “the number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) increased to 9.1 million in March. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.”
(All numbers courtesy of the Bureau of Labor Statistics, with sector-by-sector granularity available here.)
So while I’m encouraged that we are flattening, the only way I see us actually creating new jobs is if the private sector can absorb new job seekers. This nation grew to be the successful economic juggernaut it is because entrepreneurs found a need and filled it. Railroads, automobiles, moving pictures, computers, and services like the new social media mode of communication and word-of-mouth advertising, all created by people who had to make a payroll – and do. There is no question in my mind that government is necessary to prevent abuse of other citizens by crafting intelligent regulations and providing unbiased oversight. I’m not suggesting a return to the days of robber barons. Nor would I suggest in any way privatization of the essential services provided by the US military, the intelligence community, US Marshals, the Coast Guard and a host of other appropriate national-level entities.
I’m merely pointing out that the next big thing will likely come from two guys in a garage somewhere, or a little company renting a warehouse in South San Francisco, or a big company plowing the bulk of their profits back into research and development, not from someone who spends their time writing requests for grants. There is a happy medium between the untrammeled greed of the robber barons and the crippling suffocation of a nanny state where a few at the top decide they know what’s best for all the rest of us.
I’m happy for each and every one of the individual human beings who didn’t have a job in February that now have one, even if it is only a temporary position, today. But I will be mightily disappointed if the bulk of those jobs go to the most arthritic part of the economy, the part where jobs become birthrights and productivity plunges no matter how well-meaning the individual employee. I was once a member of a union back a few decades when unions protected workers’ rights. What many people don’t realize is that today the majority of American union members work for the government. Their goal is to get the best deal they can for their members, as their primary task should rightfully be. But isn’t that a bit antithetical to the original idea of organized labor? If unions now campaign for higher taxes to fund more government spending, how do those advantages accrue to the average American worker?
I’m looking forward to an employment report that shows that more jobs were created by companies that didn’t exist 5 years ago than by government. That’s when I’ll rejoice that we are back on track as a nation…
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