Where Did All Those Trumpeted New Jobs Go?

According to the monthly reports from the Bureau of Labor Statistics (BLS), the US economy gained a net of almost half a million jobs in the third quarter of 2006. Then BLS issued its aggregate quarterly report earlier this month, titled "BUSINESS EMPLOYMENT DYNAMICS: THIRD QUARTER 2006."

Like magic, most of the new jobs announced in the monthly reports disappeared. Instead of a net gain of almost half a million, BLS says the net gain was 19,000. That's not a type--nineteen thousand. Somewhere around 4% of the previously announced total.

Possibly worse is that the total number of private sector firms dwindled by some 8,000 in the third quarter of 2006--8,000 more businesses dies than were born.

An excerpt of relevant material from the quarterly summary:

Private Sector Establishment-Level Gross Job Gains and Job Losses
Opening and expanding private sector business establishments gained 7.4 million jobs in the third quarter of 2006, a decrease of 397,000 from the previous quarter. Over the third quarter, expanding establishments added 6.0 million jobs, while opening establishments added 1.4 million jobs.

Gross job losses totaled 7.3 million, an increase of 50,000 from the previous quarter. During the quarter, contracting establishments lost 6.0 million jobs, while closing establishments lost 1.3 million jobs. (See tables A, 1, and 3.)

The difference between the number of gross jobs gained and the number of gross jobs lost yielded a net change of 19,000 jobs in the private sector for third quarter 2006.

From June 2006 to September 2006, gross job gains represented 6.5 percent of private sector employment, while gross job losses represented 6.5 percent of private sector employment. (See tables A and 2.) These gross job gain and loss statistics demonstrate that a sizable number of jobs appear and disappear in the relatively short time frame of one quarter.

Number of Establishments Gaining and Losing Employment

Another way to look at the dynamics of business activities is to monitor the number and proportion of business units that are growing and declining. The third quarter of 2006 represented the first quarter where the number of contracting establishments exceeded the number of expanding establishments since the second quarter of 2003. Out of 6.9 million active private-sector establishments, a total of 1,865,000 establishments gained jobs from June 2006 to September 2006. (See table C.) Of these, 1,524,000 were expanding establishments and 341,000 were opening establishments. During the quarter, 1,542,000 establishments contracted and 349,000 establishments closed, resulting in 1,891,000 establishments losing jobs.

Overall, the number of active private sector establishments decreased by 8,000 during the quarter. This change is the difference between the number of opening establishments and the number of closing establishments.

What in the world could cause such a discrepancy between the monthly and quarterly figures? The report in the NY Times notes:

The figures do not cover exactly the same things, as a small proportion of employers — notably railroads and religious organizations — are not covered by unemployment insurance. And Kirk Mueller, a branch chief in the section of the bureau that deals with current employment statistics, said differing seasonal adjustment factors could affect the results.

Nonetheless, the Times piece also states that "Eventually, the monthly numbers will be revised to reflect the results of the quarterly survey." In other words, the quarterly figures will be treated as the final figures.
Nineteen thousand jobs over three months. Around 4% of the previously announced net gain.

Eight thousand more private sector employers going out of business than entering business.

Anyone want to reconsider the state of the economy?

"Real earnings" fall again

From today's Bureau of Economic Analysis reports on real earnings and on inflation:

[real earnings]
Real average weekly earnings fell by 0.5 percent from March to April after seasonal adjustment, according to preliminary data released today by the Bureau of Labor Statistics of the U.S. Department of Labor. A 0.3 percent decline in average weekly hours and a 0.5 percent increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) were partially offset by a 0.2 percent rise in average hourly earnings.
...

Average weekly earnings rose by 3.4 percent, seasonally adjusted, from April 2006 to April 2007. After deflation by the CPI-W, average weekly earnings increased by 0.9 percent. Before adjustment for seasonal change and inflation, average weekly earnings were $589.90 in April 2007, compared with $566.81 a year earlier.

[inflation]
During the first four months of 2007, the CPI-U rose at a 4.8 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 2.5 percent for all of 2006. The acceleration thus far this year was due to larger increases in the energy and food components. The index for energy advanced at a 25.3 percent SAAR in the first four months of 2007 compared with 2.9 percent in 2006. Petroleum-based energy costs increased at a 40.0 percent annual rate and charges for energy services rose at a 9.4 percent annual rate. The food index has increased at a 6.7 percent SAAR thus far this year, following a 2.1 percent rise for all of 2006. Excluding food and energy, the CPI-U advanced at a 2.2 percent SAAR in the first four months, following a 2.6 percent rise for all of 2006.
....
Medical care costs rose 0.4 percent in April and are 4.0 percent higher than a year ago. The index for medical care commodities-- prescription drugs, nonprescription drugs, and medical supplies--increased 0.4 percent, as did the index for medical care services . Within the later group, the index for professional services was virtually unchanged, while the index for hospital and related services increased 0.8 percent.

Try paying college tuition on those wages. Or going on any kind of vacation. OR keeping your health insurance. Or....

Health insurance stat to remember

From the abstract to Summary health statistics for the U.S. population: National Health Interview Survey, 2005 (Vital Health Stat 10. 2007 Jan;(233):1-104):

Among persons under age 65 years, about 42 million (17%) did not have any health insurance coverage. The most common reason for lacking health insurance was cost, followed by a change in employment.

The Wonderful World of Fox Presents: The Beauty of the CEO

Notwithstanding the fact that U.S. corporate profits fell in the 4th Quarter of 2006, or that many financial experts view that fall as the beginning of a broader economic downturn, our beloved Fox News happily reports the results of a corporate survey by Watson Wyatt Worldwide Inc:

CEO Salaries, Bonuses Rise in 2006 on Strong Profits

The survey results read something like an old Disney fantasy for the rich and famous:

The CEOs saw annual bonuses increase 13 percent and the value of their equity-based compensation holdings grow nearly 50 percent last year, according to a study by financial management consultants Watson Wyatt Worldwide Inc.
...
The analysis is based on proxy statements of 92 large companies whose CEOs remained in their positions in 2005 and 2006.

Median annual bonuses for chief executives increased to $2.2 million last year. At the same companies, the median growth in earnings per share was 14 percent.

The median value of CEOs' equity compensation, which includes in-the-money stock options and restricted stock awards, increased to $30.2 million last year.

Base salaries grew 4 percent to a median $1.1 million, according to the study.

Remember that the next time you're sitting at the kitchen table at 3am. trying to figure out whether eating or medical care is a higher priority given your inadequate income. And while you sit there in the middle of the night with shivers and dread, also contemplate this statement from a Market Watch piece on the falling 4th Quarter profits:

While profits are up 130% since the recession ended, industrial capacity in the United States has grown 4%, investments in equipment and software are up 22%, and employment is up 5%.

Sounds fair to me. After all, you could look at this as meaning "everything is up." Right? Huh?

The BLS monthly grim reaper report for February

From yesterday's Bureau of Labor Statistics (BLS) report on February's mass layoffs:

In February, employers took 1,280 mass layoff actions, seasonally adjusted, as measured by new filings for unemployment insurance benefits during the month, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Each action involved at least 50 persons from a single establishment; the number of workers involved totaled 143,977, on a seasonally adjusted basis. The number of mass layoff events increased by 43 from January, and the number of associated initial claims rose by 17,609. During February, 419 mass layoff events were reported in the manufacturing sector, seasonally adjusted, resulting in 64,072 initial claims. Compared with the prior month, mass layoff activity in manufacturing increased by 30 events and by 12,931 initial claims.
...
The industry with the highest number of initial claims was temporary help services (with 5,581), followed by automobile manufacturing (5,561), and motorcycle, bicycle, and parts manufacturing (3,043). Together, these three industries accounted for 16 percent of all initial claims due to mass layoffs during the month.
...
Construction accounted for 22 percent of mass layoff events and 15 percent of initial claims in February, largely from specialty trade contractors. Administrative and waste services comprised 12 percent of events and 11 percent of initial claims filed over the month, with the majority of layoffs in temporary help services. Eight percent of all mass layoff events and 7 percent of related initial claims filed were from retail trade, primarily from general merchandise stores. Transportation and warehousing made up 4 percent of events and 5 percent of associated initial claims, primarily from the school and employee bus transportation industry.
...
Among the states, California recorded the highest number of initial claims filed due to mass layoff events in February (19,809), followed by Pennsylvania (10,928), Michigan (6,507), Wisconsin (6,035), and Illinois (4,684). These five states accounted for 58 percent of all mass layoff events and 55 percent of all associated initial claims for unemployment insurance.

In short: another 143,977 jobs waving bye-bye.

Wish someone in America would say this out loud (in public)

The statement:

People in the middle class have long been said to be a robust pillar supporting the socio-economic stability of a country. So, the bigger the middle class, the better our society is. However, the number of those in the middle class here was learned to have declined substantially while those in the upper and lower classes has increased in the last 10 years, according to a report released recently...It makes one wonder whether or not a chronic social state making the rich richer and the poor poorer is being revived. The crumbling of the middle class means nothing other than those in a state of economic hopelessness are increasing. Those driven out of the middle class are set to be deprived of their courage and hope that they would be better off if they work harder.

Who said it?
No, it wasn't a Democratic legislator, or an academic with a conscience, or even an American labor leader.  It's an unbylined editorial in the Korea Times newspaper from South Korea.
Other excerpts:

According to the report, the middle class, which accounted for 55 percent of the total population in 1996, fell to 43 percent last year while those in upper and lower classes that stood at 20 percent and 11 percent, respectively, increased to 25 percent and 20 percent in the same period.
...

Particularly worrisome is the fact that those in the lower class have doubled in the last 10 years. Those driven out of their jobs or the selfemployed suffering from a long business recession are deemed to have fallen out of the middle class. The statistics testify to the worsening income polarization of our society, a phenomenon the current regime has vowed but failed to correct.
...

The recent spiraling of apartment and other real estate prices makes it extremely hard for middle or low-income people to secure their own housing. That has made a growing number of people who can't afford to buy homes regard themselves as economic "losers."
It is simply intolerable for the government to simply let the gap between haves and have-nots continue to grow---even psychologically---because it signifies social injustice in itself and threatens to destabilize society. The only plausible means to redress the situation is to vitalize business activities. A policy putting more emphasis on economic growth than on distribution should be pursued.

The government should realize that supporting the waning middle class is their foremost task because the decline of the middle class is not merely a sign of economic difficulty, but an indication that society's existence might be in danger.

Still waiting for an American paper or other media source to be that direct and honest about the situation.
And, by the way, do you still think that "globalization" is innocuous, that it's effects on America are isolated, that it's anything but a looming threat to what the developed world has long considered to be a healthy society?

Bureau of Labor Statistics Feb. report on jobs & unemployment--what it says and what it ignores

The Bureau of Labor Statistics (BLS) is the agency that issues the monthly reports on jobs, employment & unemployment, wages, and a host of other information on our collective economic health.

In keeping with the cheerleader mentality that views public confidence as more important than the reality on which the confidence is based, the BLS issued its report on February employment, and mainstream publications like the NY Times published stories based on various pieces of that report.

From the report itself (reformatted):

Month to month change for Jan '07 to Feb '07 for:

Civilian Labor force...............-190,000

Employment..........................-38,000

Unemployment.......................-152,000

Not in labor force.................+374,000

So almost 400,000 additional people moved to the category of not in the labor force, while almost 200,000 left the category of in the Civilian Labor Force. Those two numbers alone would indicate that the reported "drop" in unemployment % (from 4.6 to 4.6) is likely to be misleading. Unemployment % is calculated as number of unemployed divided by number in the labor force. Absent the 374,000 who left the labor force, the denominator of the unemployment % calculation would have been larger.

Is it large enough to account for the entire .1% drop in unemployment rate? I'm not sure, but I do know how to use a calculator to see how these civilian labor force changes change some things.

In Feb, there were 6,685,000 unemployed, from a civilian labor force of 153,784,000, or 4.347%

Add back in the 374,000 who left the labor force, and would presumably be unemployed (add the 374,000 to both the number of unemployed and the civilian labor force) and the numbers are:

7,059,000 unemployed out of 154,158,000, or 4.579%.

4.579 minus 4.347 is a reduction of .232%.

Another way of looking at this is that the January figure of not in the labor force of 77,676,000 increased by .481% to get to the Feb total of 78,050,000. That's an increase of almost half of one percent.

None of this is even mentioned in the analytical text accompanying the tables. Not even mentioned.

Compounding the problem, the NY Times report headline emphasizes three things:

1. More finding work in U.S.

2. Jobless rate off (down).

3. 97,000 added to payrolls

An accompanying chart is captioned "Job Growth Remained Healthy in the United States."

The rather odd reporting continues in the Times, which pairs the U.S. economic story with one on Europe, headlined "Jobs Go Begging in Europe.", This is accompanied by a chart which is captioned "Even in Europe, Skilled Labor is Hard to Find" but the chart of the % of European companies estimating that labor availability is limiting their production does not really show any such increase in labor scarcity. It shows the % of companies reporting labor shortages to be roughly the same as in the beginning of 2000 and the end of 2001. Only when compared to 2002-2005 is there an increase in labor scarcity, a fact explained by the drop in labor scarcity from 2002-2005.

The statement of the BLS Deputy Commissioner, which is issued at the same time as the Feb stats, also contributes to the "good news" spin. It says:

"Payroll employment was up by 97,000 over the month, following gains of 226,000 in December and 146,000 in January, as revised." So we've got a "new jobs" 3-month trend line of 226,000 dropping to 146,000 dropping to 97,000. Yet the NYT says "More finding work" and "Job Growth Remained Healthy."

So, unless I'm really missing something here, could someone from the mainstream business press explain to me exactly where the good news was in this monthly report?

Another heart warming story of jobs going to India

The official line from the US government and the vast majority of American Business leaders is "outsourcing is good for America." The number of games played to provide evidentiary support for such a notion is truly mind boggling (a subject for another post), but reality keeps raising its ugly little head and whispering "psst, buddy, there go some more jobs."

What's really fascinating is how the business press does back flips to spin a story of jobs going to India rather than the US into a classic feelgood story. Kafka and Orwell could not do a better job of absurdity reported via new speak.

Take this little gem from the Chicago Tribune on how using Indian labor to start a new Information Technology (IT) venture just made the whole startup even more special, spiced up with a few other heartwarming anecdotes about how other white collar jobs, including legal research and basic legal services, are now drifting India-ward (emphasis added):

For starters, firms turn to India
Companies find edge by using full-time outsourced workers

By Ann Meyer
Special to the Tribune
Published March 5, 2007


Entrepreneur Bill Lederer is no stranger to dot-coms, but his latest venture has taken him to a new place--India.

Lederer, the founder of Art.com a decade ago and an investor in several other early dot-coms, is rolling out CompleteLandlord.com and RentSlicer.com, two niche sites that aim to deliver comprehensive listings, legal forms and other information for landlords, property investors and renters. Both are part of Lederer's Socrates Media, financed by Lederer and other local investors.

But this time Lederer is relying on a wholly owned subsidiary in India to keep costs low and service high. The strategy will help make the company profitable sooner, he said.

"If we had gone to do this in only Chicago, it would have cost us considerably more," Lederer said. "We are able to do it faster, cheaper, better."
...
The company's subsidiary in Hyderabad is doing more than IT work. It's involved in accounting, marketing support, editorial, creative services and a customer call center, Lederer said.

"Everything we do in Chicago, they do in India," he said, though strategic decisions and new-product development are concentrated in Chicago.

Lederer started Socrates after acquiring a paper-legal-forms company, Made E-Z, in 2003. He brought it online in 2005 in a brick-to-click model, where landlords' in-store purchases of legal forms were supplemented with services from Socrates.

In December, CompleteLandlord.com launched as a separate Web site. And Lederer is taking a similar approach with RentSlicer.com, which will offer comprehensive listings and information for renters when it is launched next month.
...
Socrates employs 50 workers in India and 15 in Chicago. It started setting up its India team by hiring managers with experience working with American companies, said Bruce Masterson, Socrates' chief operating officer, who formerly ran Reuters North America.
...
CVM Solutions, an Oakbrook Terrace-based provider of supplier diversity data and technology, first outsourced its IT work to a provider in India but later formed a wholly owned subsidiary as its needs grew, said Rajesh Voddiraju, president, technology solutions. Now the company employs 36 people in India, while 46 work in Oakbrook Terrace, he said.

"Having a low-cost arm has helped us grow," he said, noting that the company saves about 70 percent in costs from the India operation.

Legal-services firm Mindcrest, with a headquarters of four in Chicago, wouldn't be in business without a wholly owned subsidiary operating in Mumbai and Pune, India, which employs about 150 Indian workers, most of them lawyers with knowledge of American law, said Ganesh Natarajan, the Chicago attorney who founded the company six years ago with three partners.

Natarajan, who is from Mumbai, saw legal services in India as a natural fit because India is a common-law country and its lawyers are used to researching case law, he said.
...
Mindcrest does not give legal advice but provides basic legal services, such as reviewing documents, drafting contracts and doing research, at savings of 50 percent to 90 percent from U.S. rates, Natarajan said. Most of the firm's clients are law firms, consulting firms and corporations with their own in-house counsel who use Mindcrest to save time and money, he said.

A positive experience using a similar legal services firm, QuisLex, based in New York but with 100 employees in India, gave Socrates the confidence to pursue Indian labor for other aspects of the start-up, Masterson said.

I think we have seen the future, and it doesn't work if you live in America.

And ask yourself, would the trusty old US government bother tracking down these jobs which originated in India, but clearly would have been in the US in decades past, and include them in its very suspect analysis of jobs lost to outsourcing?

I think not. I really, really think not.

Ignoring our way into third world status

If you were ever tempted to believe the globalization propagandists that globalization (1) creates more jobs than it takes away from the U.S., and/or (2) doesn't really affect that many jobs, check out this, from PAUL CRAIG ROBERTS:

American employees have been abandoned by American corporations and by their representatives in Congress. America remains a land of opportunity ? but for foreigners ? not for the native born. A country whose work force is concentrated in domestic nontradable services has no need for scientists and engineers and no need for universities. Even the projected jobs in nursing and school teaching can be filled by foreigners on H-1B visas.

...
The myth has been firmly established here that the jobs the U.S. is outsourcing offshore are being replaced with better jobs. There is no sign of these jobs in the payroll jobs data or in the occupational employment statistics. When a country loses entry-level jobs, it has no one to promote to senior level jobs. When manufacturing leaves, so does engineering, design, research and development, and innovation itself.

Matthew J. Slaughter, a Dartmouth economics professor rewarded for his service to offshoring with appointment to President Bush's Council of Economic Advisers, suffered no harm to his reputation when he wrote, "For every one job that U.S. multinationals created abroad in their foreign affiliates, they created nearly two U.S. jobs in their parent operations." In other words, Slaughter claims that offshoring is creating more American jobs than foreign ones.

How did Slaughter arrive at this conclusion? Not by consulting the BLS payroll jobs data or the BLS Occupational Employment Statistics. Instead, Slaughter measured the growth of U.S. multinational employment and failed to take into account the two reasons for the increase in multinational employment: (1) Multinationals acquired many existing smaller firms, thus raising multinational employment but not overall employment, and (2) many U.S. firms established foreign operations for the first time and thereby became multinationals, thus adding their existing employment to Slaughter's number for multinational employment.

ABC News' John Stossel, a libertarian hero, recently made a similar error. In debunking Lou Dobbs' concern with U.S. jobs lost to offshore outsourcing, Stossel invoked the California-based company, Collabnet. He quotes the CEO's claim that outsourcing saves his company money and lets him hire more Americans. Turning to Collabnet's webpage, it is very instructive to see the employment opportunities that the company posts for the United States and for India.

In India, Collabnet has openings (at time of writing) for eight engineers, a sales engineer, a technical writer, and a telemarketing representative. In the U.S. Collabnet has openings for one engineer, a receptionist/office assistant, and positions in marketing, sales, services and operations. Collabnet is a perfect example of what Lou Dobbs and I report: the engineering and design jobs move abroad, and Americans are employed to sell and market the foreign-made products.

Other forms of deception are widely practiced. For example, Matthew Spiegleman, a Conference Board economist, claims that manufacturing jobs are only slightly higher paid than domestic service jobs, so there is no meaningful loss in income to Americans from offshoring. He reaches this conclusion by comparing only hourly pay and leaving out the longer manufacturing workweek and the associated benefits, such as health care and pensions.

Occasionally, however, real information escapes the spin machine. In February 2006 the National Association of Manufacturers, one of offshoring's greatest boosters, released a report, "U.S. Manufacturing Innovation at Risk," by economists Joel Popkin and Kathryn Kobe.16 The economists find that U.S. industry's investment in research and development is not languishing after all. It just appears to be languishing, because it is rapidly being shifted overseas: "Funds provided for foreign-performed R&D have grown by almost 73 per cent between 1999 and 2003, with a 36 per cent increase in the number of firms funding foreign R&D."

U.S. industry is still investing in R&D after all; it is just not hiring Americans to do the research and development. U.S. manufacturers still make things, only less and less in America with American labor. U.S. manufacturers still hire engineers, only they are foreign ones, not American ones.

Danger: Evangelical Economist at Work

You may have noticed that there is a connection between evangelical Christian beliefs and the belief that all people should be left to the mercy of the "market" rather than aided by government intervention. This phenomenon goes back at least to the Congressional debate over whether to enact the Social Security Act, when good, god-fearing men who ran the industries and financial centers of the day sat before Congress and warned in deep, somber voices that the program would destroy the moral fiber of the nation (poverty wouldn't affect morals, mind you, but government efforts to reduce poverty would). British evangelicals played a part in creating the horrible workhouses of 19th century England, and, from what I understand, in preventing the British government from alleviating the consequences of the Irish potato famine.

Now why do you suppose that is?

Before getting into that, here's an example of what I'm talking about. James Sherk is an economist with the Heritage Foundation. James Sherk is also the lead economics editor for a group called evangelsociety.org.

Mr. Sherk writes stuff like this for Heritage:

Who Earns the Minimum Wage? Suburban Teenagers, Not Single Parents

Union Members, Not Minimum-Wage Earners, Benefit When the Minimum Wage Rises

As I said, Mr. Sherk is also on board at evangelsociety, which describes itself thus:

Evangel Society Mission Statement

Established 2002

In order to love the Lord our God with all of our minds, The Evangel Society of Thought exists for the purpose of examining the world around us. From the foundation of a Christian worldview and a passion for the Good News, the Evangel, we will explore issues ranging from politics and economics to religion and popular culture.

The Evangel Society believes that

We are able to go up and take the country,
To possess the land from Jordan to the Sea.
'Though the giants may be there, our way to hinder,
Our God has given us the victory.
~ Paraphrase of Numbers 14

We will take every thought captive to Christ. Our vision is that the Lord will use us to equip believers with reasoned analysis of the critical issues of the day. There are "giants in the land," ideas and institutions that stand opposed to the Gospel of Christ, but we are confident that the Bible, as the inspired word of God, shall prevail over all of its challengers. We will contend for its primacy in the arena of ideas.

Now it seemed off to me, when I first thought about it, that people dedicated to a Christian life would also be so dedicated to combating government attempts to alleviate poverty and other human misery. But then, so many people who are passionate about their Christianity, who mold every moment of their lives to that belief, are, well, harsh. Really, really harsh. Unforgiving of what they perceive to be the sins of others.

So here's what I came up with on why evangelical Christians are so often aligned with the conservative business community when it comes to employment, wages, and worker rights:

1. They equate economic success with God's love; hence the poor are viewed as less loved by God than are the rich.

2. Their focus is ultimately on the afterlife, rather than the corporeal life on earth, and have a strong belief that human suffering is part of God's plan to reward the worthy after they are dead.

3. They are indoctrinated with the idea that life is a battle between good and evil, and that sloth and sexual sinning are evil, and see the poor as likely to commit the sins of both sloth and sexuality.

4. They are indoctrinated with the idea that obedience to government is itself a dangerous, perhaps sinful thing in itself, since all obedience should be to God and/or Jesus.

So am I right on this? Who knows. I do know that there have been far too many times that I read some analysis of economic issues that struck me as patently askew, to a degree that makes me suspect deliberate fraud, only to discover that the author is a devout Christian of the evangelical stripe.

What we need is a standard warning for these tracts on the evils of government intervention to protect the people. Maybe a nice bright white sign, with graphics of flames licking at the edges, with the following in large, fancy, gold letters:

Danger: Evangelical Economist at Work