Let me warn you that reading this analysis about the September nonfarm payroll is a complete waste of your precious time. But since it’s a holiday, and you don’t feel like mowing the lawn, raking the leaves, or washing the car, please read on.
First, the dismal numbers. The Department of Labor reported a net loss of 95,000 jobs, leaving the unemployment rate at a lofty 9.6%. Private sector job gains were run over by the steamroller of 159,000 government job cuts, mostly at the state and local level. There was no change in average hourly earnings. There were gains in health care, business services, and leisure and hospitality, while there were cuts in construction, as always, and manufacturing. Some 14.8 million Americans remain unemployed, 6.1 million for six months or longer.
Now, for the reason I never bother to follow these numbers any more. If you add in discouraged workers, the underemployed, and those working part time who would rather be working full time, the true number of unemployed is closer to 30 million, or about one in five Americans. Never mind the statistics that the government pumps out monthly are meaningless. They have been for decades.
The real problem is that the economy is obliterating jobs far faster than anyone realizes. My guess is that over the past decade as many as 25 million jobs were exported to China and other low waged emerging markets by globally adept, bottom line oriented corporations. Tens of millions more have been vaporized by the relentless march of technology. How many elevator operators, radio repairmen, gas station attendants, or telephone operators have you met lately? Add to that a structural over employment by states and municipalities that will take a decade or two to unwind. The net is that none of these jobs are ever coming back.
My old UC Berkeley economic professor and friend, Robert Reich, told me a fascinating story the other day. After enticing a major European company with huge tax incentives, infrastructure gifts, zoning holidays, and who knows what else, a Midwestern state landed a new manufacturing plant. Since Bob was Clinton’s Labor Secretary, the governor invited him to the ribbon cutting ceremony. But before the festivities began, Bob ran inside for a quick tour. There were only 13 workers, all technicians, who manned the computers that operated the machinery. This facility replaced an earlier one that had once employed thousands. Bob threw up his hands and walked away.
What all this means is that the unemployment rate in the US is never going to recover to the heady 4%-5% rate of our youths. At best, we can grind down to maybe 7%-8% in coming years as the economy slowly recovers. Then, when the next recession hits, official unemployment will spike up to 15%, and the unofficial one to 25%-30%. This is why you’ll never hear a recommendation to buy retail or consumer spending stocks pass my lips. I watched Germany suffer through long term structural unemployment for a decade, and it is not a pretty picture, and that was with a huge social safety net in place which we lack.
Let me mention an inconvenient truth here. There is nothing either political party can do about this, despite the blustery promises made by all sides. You can offer all of the tax incentives and job training programs you want. It’s not going to make a bit of difference. The $250 billion in infrastructure in Obama’s stimulus package last year will at best employ a few tens of thousands and add a mere 0.5%-1.0% to GDP growth, hardly a dent in a $14 trillion economy. Even construction companies are becoming efficient in their labor management. You might as well be pissing in the ocean.
Bob gave me another insight into our jobs future. He recently compared at a list of job categories when he was Labor Secretary to the current one, and noticed that about a quarter of today’s jobs did not exist 20 years ago. Eventually, labor and jobs will come into balance through the acceleration of new technologies that create entire new industries, slowing population growth, and imported inflation depriving emerging markets from their cost advantage. That is how our jobless headache is going to end, but it is a decades long process, and certainly not worth losing sleep over the first Friday of every month. By then, I’ll be collecting social security, if it hasn’t gone broke. That’s why reading this article was a total waste of time.