Some Good Employment News at Last

The month of April has brought us three reports that indicate that growth in employment may finally have returned to the US in March. On April 2, the BLS released “The Employment Situation” for March and the first piece of good news was that nonfarm payroll employment rose by 162,000 jobs in March. This was the first statistically significant increase in this closely watched measure since December 2007, when the recession began. There were small increases in November 2009 and January 2010, but the net change has to be larger than 108,000 jobs to be statistically significant.

The second bit of good news was that the total number of people employed rose by 264,000 in March after an increase of 308,000 in February. We had not seen two consecutive months of growth in this measure, which directly influences the unemployment rate, since October and November 2007, just before the recession began. The unemployment rate held at 9.7 percent for the third straight month. That’s not wonderful news, but it sure beats continuing increases.

On April 6, the BLS released the JOLTS report for February. That report said there were 2.7 million job openings on the last business day of February.

For the first time, the BLS released a very interesting group of graphs with analytical information with that report. These showed that the number of job openings hit its recent peak of 4.8 million in March 2007, well before the recession started. It fell to 2.3 million openings in July 2009. Since then it has gradually moved up to 2.7 million.

The JOLTS report also showed that in February, for the first time since the recession began, the number of new hires was equal to the number of job separations. Both totaled 4.0 million in February.

For the twelve months ended in February 2010, there were 48.3 million people hired and 51.5 million people separated. That’s a net employment loss of 3.2 million, which is 2.2 million better than where we were in December 2009.

On April 16, the BLS released the state employment data for March. Following the good news from the national report, this release showed that 33 states and the District of Columbia had a seasonally adjusted increase in nonfarm payroll employment in March as compared to February. Three states (Alaska, New Hampshire and North Dakota) and the District of Columbia had increases from March 2009.

Only Alaska, North Dakota and the District of Columbia posted increases in nonfarm payroll employment since the recession began. Nevada has lost 13.7 percent of its jobs since then, followed by Arizona (-10.7 percent), Michigan (-9.9 percent), Florida (-9.7 percent), California (-8.8 percent), Oregon (-8.8 percent), Georgia (-8.3 percent) and Idaho (-8.1 percent).

In terms of total employment, only Texas (1.4 percent) and Alaska (0.1 percent) have shown increases since the recession began. That should change dramatically over the course of 2010.

Jobless Claims Are Finally Encouraging Again

On April 1 the US Department of Labor told us that the number of people filing first-time claims for unemployment insurance fell to 439,000 for the week ended March 27. That matched the level for the week ended February 6.

Both of these were the lowest since the week ended August 23, 2008. That was before the September 15 collapse of Lehman Brothers set off a global collapse.

We probably need to see claims constantly below 400,000 a week to signal robust improvement in the employment numbers. That should come soon.

Consumers: Can Bad News Be a Harbinger of Great News?

On October 27 the Conference Board told us that their measure of consumer confidence fell from 53.4 (1985=100) in September to 47.7 in October. Even worse, the part of the index that measures what consumers think about current conditions fell to 20.7 from 23.0 in September, the lowest since the 17.5 of February 1983.

Both these results are undoubtedly due to the high rate of unemployment. That was 9.8 percent in October compared to 10.4 percent in February 1983. Click here to read the full post and comment (Insights subscribers) »

Minimum Wage, Maximum Stupidity

Congress has increased the cost of unskilled labor by 10.7 percent in the middle of the worst recession since the early 1980s. The unemployment rate is 9.5 percent. It is unclear how this is supposed to help the economy – unless you are Labor Secretary Solis or the Economic Policy Institute. The claim is that this will produce $5 billion in increased income and spending. One simple question – where does this $5 billion come from? Apparently the Administration thinks it appears from nowhere because if it doesn’t, then it has to come out of the pockets of someone else. Where do small business owners get $5 billion to give to minimum wage workers? Do the funds magically appear? If so, let’s make the minimum wage $50 an hour, eliminate poverty and stimulate the economy. The fact is that every new dollar a minimum wage worker receives must come from the pockets of business owners and consumers paying higher prices. Minimum wage workers may get more to spend, but other consumers lose an identical amount, there can be no “stimulus” here.

If GM has too many “unemployed cars” on its lots, it reduces prices to get them “employed” providing transportation. But with 14 million unemployed workers “on the lot,” Congress raises the price of labor. This defies logic and common sense. The Law of Demand applies to everything, even labor. The higher the price, the lower the quantity taken.

Companies cannot afford to pay workers more than they add to the value of the firm. The higher the minimum wage, the greater is this hurdle. A higher minimum wage makes it more difficult for young, unskilled and handicapped workers to get jobs that justify the higher wage now required. This PERMANENTLY reduces job opportunities for these workers, denying them the opportunity to enter the labor force and get “on the job” training, making them more productive workers. Instead, they return to the street corners and the underground economy.

From the Tennessean: “ ‘The way the economy is now, and for a man who is trying to raise a family, it’s not enough,’ said Julius Stoval, 26, who earns minimum wage as a worker at Shur Brite Speed Car Wash here. He has two children in Chicago and a third on the way in Nashville.”

If the minimum wage is supposed to be a welfare program supported by taxes on business owners and customers (through lower profits and higher prices), it is very poorly focused. About 40 percent of all minimum wage workers come from above-median income families. They are not “in poverty.” The earned income tax credit is designed to help people like Mr. Stoval who has more family responsibilities than he can support. The minimum wage is not an effective “anti-poverty” program.

Of course, the estimated $5 billion increase in wages that results from the new minimum wage law is just the start of the problem. A worker hired at the minimum wage last year and who worked hard and got a raise now finds that new unskilled workers get the same pay. Now a more valuable worker after a year of experience, this individual will be able to get a higher wage with the skill premium included. Thus, the increase will “bubble” through the entire wage structure over time. As prices rise to cover these costs (and they will, firms that can’t raise prices will fail, sacrificing all jobs at those firms).

So, here’s the bottom line: (1) there is no “stimulus” from the increased minimum wage. Every dollar a worker received comes out of the pockets of consumers and business owners; (2) a 10.7 percent increase in the cost of less skilled labor will cost jobs (David Neumark estimates 300,000 for those under 25 years of age); (3) a higher minimum wage permanently reduces job opportunities for unskilled and handicapped workers, denying them the opportunity to become productive members of the labor force; (4) the higher minimum requires business owners to pay more for the same labor (with no increase in output), raising unit labor costs which reduces profits in a weak economy, puts pressure on prices in a growing economy; (5) a higher minimum is a poorly focused poverty program, missing its target almost 50 percent of the time. Less skilled workers losing their jobs are seriously harmed and opportunities for them to get a job in the future are reduced.

If there were ever a bad time to raise the cost of labor, it’s now. What is Congress thinking? Or, are they?

Sad to Say, the Awful Employment Data Could Have Been Worse

On March 6 the BLS released its report “The Employment Situation: February 2009.” It was chock full of depressing news.

For unknown reasons, some 498,000 people in the US decided that February was a great time to enter the civilian labor force, swelling the seasonally adjusted total to 154,214,000 people, which was still 233,000 people fewer than in December 2008. Unfortunately, the total number of civilian employed in February fell 354,000 to 141,748,000. This meant that 8.1 percent of the civilian labor force or 12,467,000 people were unemployed and looking for work in February.

As the media duly trumpeted, that was the highest unemployment rate since December 1983 when it was 8.3 percent. Of course, that was a dramatic decline from the 10.8 percent unemployment rate of December (and November) 1982, the highest levels since the end of World War II.

Even with an 8.1 percent seasonally adjusted unemployment rate in February, that still meant that 919 out of every 1,000 people who wanted a job last month had one. For the entire 64 years since the end of World War II, there have been only ten months (September 1982 through June 1983) when fewer than nine of every ten people who wanted a job had one. That’s a record nearly every other country in the world would envy.

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