Bob Marshall’s BLS Analysis; 9/2/11
Labor Day 2011
BLS Preface:
In view of the upcoming Labor Day national holiday (the day we have set aside—since 1894—to pay tribute to working men and women) and the President’s upcoming ‘Jobs’ address to the nation on September 8th, I would like to add a short preface to my monthly BLS Analysis relating to job creation in the private sector.
Small & Mid-sized companies
Last month, when a few of you asked me to compare the government numbers with those issued in the monthly ADP report, I was reminded of a basic tenet of our economy: That job creation comes from small and mid-sized companies.
Re: BLS and ADP; trying to reconcile government reports with private industry reports is a bit of a challenge—especially when Macroeconomic Advisers, LLC, processes it’s info in a different time frame (12th of the month) and pulls from roughly 340,000 business clients representing more than 21,000,000 US employees. So, it’s a little bit like comparing apples with oranges. At the best, the ADP report has a mixed track record at presaging the government’s monthly report. That being said…
On August 31st ADP announced that private-sector payrolls rose by 91,000 in August (down from 114,000 in July—actually that number was revised down to 109,000). But this is what gets my attention: Much of the employment gain in the ADP report was among small and medium-size private service companies. Larger companies, with 500 or more employees, added only 3,000 workers in August (down from the addition of only 9,000 workers in July), while medium-size businesses (50-499 workers) added 30,000 workers (down from the addition of 47,000 workers the month prior). Small firms, with fewer than 50 employees, hired 58,000 workers (the same as the month before). So, of the 91,000 job additions ADP reported in August, a walloping 88,000 (or 96.7%) came from small and mid-sized firms. Gary C. Butler, CEO of ADP said, “Small businesses continued to add the most jobs—more than half of the total of 91,000—with positive growth for the 21st straight month, and an average of 71,000 jobs a month for the past year.”
If I can be so bold as to give the President one piece of advice it would be to find out what the small and mid-sized company entrepreneurs want and provide it to them. Anything else you do is just talk. I, for one, do not want to be lectured to again by the Chinese!
And to my audience of recruiters, always remember this: Our ‘bread and butter’, especially on the contingency side of the house, has historically been with small and medium sized client companies. These companies need to be in your marketing mix!
Another negative hit to Green Energy
On August 31, 2011, Solyndra, in Fremont, CA, went bankrupt and shut down. Solyndra was the recipient of a one-half billion dollar loan to create jobs in the United States at a time when 95% of solar panels were built overseas. It created 158 jobs, but those jobs and 1,000 more are now gone.
Solyndra developed a high-profile when President Obama visited the facility one year after the Department of Energy loaned the company $535 million to build a new, automated assembly line. The money came from federal stimulus funds.
Out of the loan, $519 million has been spent as of the company’s latest fling with the government at the end of June. Just over half of the money went to the Redwood City-based Rudolph & Sletten, the contractor that built the plant. (There were no empty plants available for rent in the Bay Area??)
Solyndra has cost taxpayers over $500 million; an investment the government hoped would create jobs and foster a clean energy future.
Solyndra says it hopes to sell the company, or license its technology, as part of the bankruptcy process. However, analysts say that Solyndra’s technology won’t integrate well with what other solar companies are doing.
Final dismal number
In August 2011, and for the first time since World War II, our economy had precisely net zero jobs created for the month.
The August BLS Analysis:
The unemployment rate is published by the Bureau of Labor Statistics, a division of the US Department of Labor. The rate is found by dividing the number of unemployed by the total civilian labor force. On September 2, 2011, the BLS published the most recent unemployment rate for August, 2011 of 9.1% (actually it is 9.093%, slightly up .001% from 9.092% in July, 2011). This was determined by dividing the unemployed of 13,967,000 (up from the month before by 36,000—since August, 2010 (one year ago), this number has decreased by 882,000) by the total civilian labor force of 153,594,000 (up by 366,000 from July, 2011). Since August 2010, our total civilian labor force has decreased by 523,000 people. On the surface, these new unemployment rates are scary, but let’s look a little deeper and consider some other numbers.
The unemployment rate includes all types of workers—construction workers, farmers, etc. We recruiters, on the other hand, mainly place management, professional and related types of workers. That unemployment rate in August was fixed at 4.9% (this rate is .1% lower than last month’s 5.0%). Or, you can look at it another way. We usually place people who have college degrees. That unemployment rate in August was fixed at 4.3% (this rate is the same as last month’s 4.3%).
Usually at this point, I talk about Milton Friedman and his famous theory of the natural rate of unemployment and I use his ‘macro’ concept to discuss a ‘micro issue’; i.e., unemployment rates among professionals and college-degreed people*, but, as with last seven month’s analyses that were so well received, I want to take a different tack—I want to quickly explore this topic of ‘Unemployment’.
*(For more info on Milton Friedman and NAIRU, please see my BLS Analyses archives on my website: bob@themarshallplan.org.)
THE IMPORTANCE OF GDP
“The economic goal of any nation, as of any individual, is to get the greatest results with the least effort. The whole economic progress of mankind has consisted in getting more production with the same labor…Translated into national terms, this first principle means that our real objective is to maximize production. In doing this, full employment—that is, the absence of involuntary idleness—becomes a necessary by-product. But production is the end, employment merely the means. We cannot continuously have the fullest production without full employment. But we can very easily have full employment without full production.”
—Economics in One Lesson, by Henry Hazlitt, Chapter X, “The Fetish of Full Employment”
IT IS IMPOSSIBLE FOR UNEMPLOYMENT EVER TO BE ZERO
‘Unemployment’ is an emotional ‘trigger’ word. It conjures up negative thoughts. But it is important to realize that, while we want everyone who wants a job to have the opportunity to work, unemployment can never be zero and, in fact, can be disruptive to an economy if it gets too close to zero. Very low unemployment can actually hurt the economy by creating an upward pressure on wages which invariably leads to higher production costs and prices. This can lead to inflation. A healthy economy will always include some percentage of unemployment. The debate is waged on what is the optimum, acceptable unemployment rate.
There are four main sources of unemployment:
1. Cyclical (or demand-deficient) unemployment – This type of unemployment fluctuates with the business cycle. It rises during a recession and falls during the subsequent recovery. Workers who are most affected by this type of unemployment are laid off during a recession when production volumes fall and companies use lay-offs as the easiest way to reduce costs. These workers are usually rehired, some months later, when the economy improves.
2. Frictional unemployment – This comes from the normal turnover in the labor force. This is where new workers are entering the workforce and older workers are retiring and leaving vacancies to be filled by the new workers or those re-entering the workforce. This category includes workers who are between jobs.
3. Structural unemployment – This happens when the skills possessed by the unemployed worker don’t match the requirements of the opening—whether those be in characteristics and skills or in location. This can come from new technology or foreign competition (e.g., foreign outsourcing). This type of unemployment usually lasts longer than frictional unemployment because retraining, and sometimes relocation, is involved. Occasionally jobs in this category can just disappear overseas.
4. Seasonal unemployment – This happens when the workforce is affected by the climate or time of year. Construction workers and agricultural workers aren’t needed as much during the winter season because of the inclement weather. On the other hand, retail workers experience an increase in hiring shortly before, and during, the holiday season, but can be laid off shortly thereafter.
Other factors influencing the unemployment rate:
1. Length of unemployment – Some studies indicate that an important factor influencing a workers decision to accept a new job is directly related to the length of the unemployment benefit they are receiving. There has certainly been some debate about the ninety-nine weeks (nearly two years) of unemployment benefits currently available in the US.
2. Changes in GDP – Since hiring workers takes time, the improvement in the unemployment rate usually lags behind the improvement in the GDP.
WHERE RECRUITERS PLACE
Now back to the issue at hand, namely the recruiting, and placing, of professionals and those with college degrees.
If you take a look at the past few years of unemployment in the August “management, professional and related” types of worker category, you will find the following rates:
August 2010 5.1%
August 2009 5.4%
August 2008 3.3%
August 2007 2.6%
August 2006 2.4%
August 2005 2.5%
August 2004 2.9%
August 2003 3.6%
August 2002 3.4%
Here are the rates, during those same time periods, for “college-degreed” workers:
August 2010 4.6%
August 2009 4.7%
August 2008 2.7%
August 2007 2.1%
August 2006 1.8%
August 2005 2.1%
August 2004 2.7%
August 2003 3.1%
August 2002 2.8%
So, while August 2011’s rates for these two categories, of 4.9% and 4.3% respectively, are not huge when looking at the big picture, it’s not anything to be very happy about either—especially when we see how well we had it during the 2002-2008 time frame (Obama took office January 20, 2009). But regardless, these unemployment numbers usually include a good number of job hoppers, job shoppers and rejects. We, on the other hand, are engaged by our client companies to find those candidates who are happy, well-appreciated, making good money and currently working and we entice them to move for even better opportunities—especially where new technologies are expanding. This will never change. And that is why, no matter the unemployment rate, we still need to market to find the best job orders and we still need to recruit to find the best candidates.
Below are the numbers for the over 25 year olds:
Less that H.S. diploma – Unemployment Rate
|
12/08 |
|
10.9% |
|
1/09 |
2/09 |
3/09 |
4/09 |
5/09 |
6/09 |
7/09 |
8/09 |
9/09 |
10/09 |
11/09 |
12/09 |
|
12.0% |
12.6% |
13.3% |
14.8% |
15.5% |
15.5% |
15.4% |
15.6% |
15.0% |
15.5% |
15.0% |
15.3% |
|
1/10 |
2/10 |
3/10 |
4/10 |
5/10 |
6/10 |
7/10 |
8/10 |
9/10 |
10/10 |
11/10 |
12/10 |
|
15.2% |
15.6% |
14.5% |
14.7% |
15.0% |
14.1% |
13.8% |
14.0% |
15.4% |
15.3% |
15.7% |
15.3% |
|
1/11 |
2/11 |
3/11 |
4/11 |
5/11 |
6/11 |
7/11 |
8/11 |
9/11 |
10/11 |
11/11 |
12/11 |
|
14.2% |
13.9% |
13.7% |
14.6% |
14.7% |
14.3% |
15.0% |
14.3% |
|
|
|
|
H.S. Grad; no college – Unemployment Rate
|
12/08 |
|
7.7% |
|
1/09 |
2/09 |
3/09 |
4/09 |
5/09 |
6/09 |
7/09 |
8/09 |
9/09 |
10/09 |
11/09 |
12/09 |
|
8.1% |
8.3% |
9.0% |
9.3% |
10.0% |
9.8% |
9.4% |
9.7% |
10.8% |
11.2% |
10.4% |
10.5% |
|
1/10 |
2/10 |
3/10 |
4/10 |
5/10 |
6/10 |
7/10 |
8/10 |
9/10 |
10/10 |
11/10 |
12/10 |
|
10.1% |
10.5% |
10.8% |
10.6% |
10.9% |
10.8% |
10.1% |
10.3% |
10.0% |
10.1% |
10.0% |
9.8% |
|
1/11 |
2/11 |
3/11 |
4/11 |
5/11 |
6/11 |
7/11 |
8/11 |
9/11 |
10/11 |
11/11 |
12/11 |
|
9.4% |
9.5% |
9.5% |
9.7% |
9.5% |
10.0% |
9.3% |
9.6% |
|
|
|
|
Some College; or AA/AS – Unemployment Rate
|
12/08 |
|
5.6% |
|
1/09 |
2/09 |
3/09 |
4/09 |
5/09 |
6/09 |
7/09 |
8/09 |
9/09 |
10/09 |
11/09 |
12/09 |
|
6.2% |
7.0% |
7.2% |
7.4% |
7.7% |
8.0% |
7.9% |
8.2% |
8.5% |
9.0% |
9.0% |
9.0% |
|
1/10 |
2/10 |
3/10 |
4/10 |
5/10 |
6/10 |
7/10 |
8/10 |
9/10 |
10/10 |
11/10 |
12/10 |
|
8.5% |
8.0% |
8.2% |
8.3% |
8.3% |
8.2% |
8.3% |
8.7% |
9.1% |
8.5% |
8.7% |
8.1% |
|
1/11 |
2/11 |
3/11 |
4/11 |
5/11 |
6/11 |
7/11 |
8/11 |
9/11 |
10/11 |
11/11 |
12/11 |
|
8.0% |
7.8% |
7.4% |
7.5% |
8.0% |
8.4% |
8.3% |
8.2% |
|
|
|
|
BS/BS + – Unemployment Rate
|
12/08 |
|
3.7% |
|
1/09 |
2/09 |
3/09 |
4/09 |
5/09 |
6/09 |
7/09 |
8/09 |
9/09 |
10/09 |
11/09 |
12/09 |
|
3.8% |
4.1% |
4.3% |
4.4% |
4.8% |
4.7% |
4.7% |
4.7% |
4.9% |
4.7% |
4.9% |
5.0% |
|
1/10 |
2/10 |
3/10 |
4/10 |
5/10 |
6/10 |
7/10 |
8/10 |
9/10 |
10/10 |
11/10 |
12/10 |
|
4.9% |
5.0% |
4.9% |
4.9% |
4.7% |
4.4% |
4.5% |
4.6% |
4.4% |
4.7% |
5.1% |
4.8% |
|
1/11 |
2/11 |
3/11 |
4/11 |
5/11 |
6/11 |
7/11 |
8/11 |
9/11 |
10/11 |
11/11 |
12/11 |
|
4.2% |
4.3% |
4.4% |
4.5% |
4.5% |
4.4% |
4.3% |
4.3% |
|
|
|
|
Management, Professional & Related – Unemployment Rate
|
12/08 |
|
3.3% |
|
1/09 |
2/09 |
3/09 |
4/09 |
5/09 |
6/09 |
7/09 |
8/09 |
9/09 |
10/09 |
11/09 |
12/09 |
|
4.1% |
3.9% |
4.2% |
4.0% |
4.6% |
5.0% |
5.5% |
5.4% |
5.2% |
4.7% |
4.6% |
4.6% |
|
1/10 |
2/10 |
3/10 |
4/10 |
5/10 |
6/10 |
7/10 |
8/10 |
9/10 |
10/10 |
11/10 |
12/10 |
|
5.0% |
4.8% |
4.7% |
4.5% |
4.5% |
4.9% |
5.0% |
5.1% |
4.4% |
4.5% |
4.7% |
4.6% |
|
1/11 |
2/11 |
3/11 |
4/11 |
5/11 |
6/11 |
7/11 |
8/11 |
9/11 |
10/11 |
11/11 |
12/11 |
|
4.7% |
4.4% |
4.3% |
4.0% |
4.4% |
4.7% |
5.0% |
4.9% |
|
|
|
|
Or employed…(,000)
|
12/08 |
|
52,548 |
|
1/09 |
2/09 |
3/09 |
4/09 |
5/09 |
6/09 |
7/09 |
8/09 |
9/09 |
10/09 |
11/09 |
12/09 |
|
52,358 |
52,196 |
52,345 |
52,597 |
52,256 |
51,776 |
51,810 |
51,724 |
52,186 |
52,981 |
52,263 |
52,131 |
|
1/10 |
2/10 |
3/10 |
4/10 |
5/10 |
6/10 |
7/10 |
8/10 |
9/10 |
10/10 |
11/10 |
12/10 |
|
52,159 |
52,324 |
52,163 |
52,355 |
51,839 |
51,414 |
50,974 |
50,879 |
51,757 |
51,818 |
52,263 |
51,704 |
|
1/11 |
2/11 |
3/11 |
4/11 |
5/11 |
6/11 |
7/11 |
8/11 |
9/11 |
10/11 |
11/11 |
12/11 |
|
51,866 |
52,557 |
53,243 |
53,216 |
52,778 |
52,120 |
51,662 |
51,997 |
|
|
|
|
And unemployed…(,000)
|
12/08 |
|
1,802 |
|
1/09 |
2/09 |
3/09 |
4/09 |
5/09 |
6/09 |
7/09 |
8/09 |
9/09 |
10/09 |
11/09 |
12/09 |
|
2,238 |
2,137 |
2,292 |
2,164 |
2,373 |
2,720 |
3,034 |
2,925 |
2,859 |
2,593 |
2,530 |
2,509 |
|
1/10 |
2/10 |
3/10 |
4/10 |
5/10 |
6/10 |
7/10 |
8/10 |
9/10 |
10/10 |
11/10 |
12/10 |
|
2,762 |
2,637 |
2,600 |
2,464 |
2,450 |
2,644 |
2,687 |
2,762 |
2,381 |
2,417 |
2,525 |
2,468 |
|
1/11 |
2/11 |
3/11 |
4/11 |
5/11 |
6/11 |
7/11 |
8/11 |
9/11 |
10/11 |
11/11 |
12/11 |
|
2,557 |
2,435 |
2,381 |
2,196 |
2,419 |
2,598 |
2,742 |
2,671 |
|
|
|
|
For a total Management, Professional & Related workforce of…(,000)
|
12/08 |
|
54,350 |
|
1/09 |
2/09 |
3/09 |
4/09 |
5/09 |
6/09 |
7/09 |
8/09 |
9/09 |
10/09 |
11/09 |
12/09 |
|
54,596 |
54,333 |
54,637 |
54,761 |
54,629 |
54,496 |
54,844 |
54,649 |
55,045 |
55,574 |
54,793 |
54,640 |
|
1/10 |
2/10 |
3/10 |
4/10 |
5/10 |
6/10 |
7/10 |
8/10 |
9/10 |
10/10 |
11/10 |
12/10 |
|
54,921 |
54,961 |
54,763 |
54,819 |
54,289 |
54,058 |
53,661 |
53,641 |
54,138 |
54,235 |
54,788 |
54,172 |
|
1/11 |
2/11 |
3/11 |
4/11 |
5/11 |
6/11 |
7/11 |
8/11 |
9/11 |
10/11 |
11/11 |
12/11 |
|
54,423 |
54,992 |
55,624 |
55,412 |
55,197 |
54,718 |
54,404 |
54,668 |
|
|
|
|
Management, Business and Financial Operations – Unemployment Rate
|
12/08 |
|
3.9% |
|
1/09 |
2/09 |
3/09 |
4/09 |
5/09 |
6/09 |
7/09 |
8/09 |
9/09 |
10/09 |
11/09 |
12/09 |
|
4.6% |
4.5% |
4.5% |
4.4% |
4.6% |
4.8% |
4.9% |
5.0% |
5.2% |
5.4% |
5.4% |
5.2% |
|
1/10 |
2/10 |
3/10 |
4/10 |
5/10 |
6/10 |
7/10 |
8/10 |
9/10 |
10/10 |
11/10 |
12/10 |
|
5.2% |
5.1% |
5.4% |
5.1% |
4.9% |
4.8% |
4.7% |
4.9% |
4.3% |
5.0% |
5.5% |
5.7% |
|
1/11 |
2/11 |
3/11 |
4/11 |
5/11 |
6/11 |
7/11 |
8/11 |
9/11 |
10/11 |
11/11 |
12/11 |
|
5.3% |
4.9% |
4.8% |
4.6% |
4.9% |
4.6% |
4.6% |
4.6% |
|
|
|
|
Professional & Related – Unemployment Rate
|
12/08 |
|
2.9% |
|
1/09 |
2/09 |
3/09 |
4/09 |
5/09 |
6/09 |
7/09 |
8/09 |
9/09 |
10/09 |
11/09 |
12/09 |
|
3.7% |
3.5% |
3.9% |
3.6% |
4.2% |
5.1% |
6.0% |
5.6% |
5.2% |
4.2% |
4.1% |
4.2% |
|
1/10 |
2/10 |
3/10 |
4/10 |
5/10 |
6/10 |
7/10 |
8/10 |
9/10 |
10/10 |
11/10 |
12/10 |
|
4.9% |
4.6% |
4.3% |
4.1% |
4.3% |
5.0% |
5.2% |
5.3% |
4.4% |
4.1% |
4.1% |
3.8% |
|
1/11 |
2/11 |
3/11 |
4/11 |
5/11 |
6/11 |
7/11 |
8/11 |
9/11 |
10/11 |
11/11 |
12/11 |
|
4.3% |
4.1% |
3.9% |
3.5% |
4.0% |
4.9% |
5.3% |
5.1% |
|
|
|
|
Sales & Related – Unemployment Rate
|
12/08 |
|
7.0% |
|
1/09 |
2/09 |
3/09 |
4/09 |
5/09 |
6/09 |
7/09 |
8/09 |
9/09 |
10/09 |
11/09 |
12/09 |
|
7.7% |
8.4% |
8.9% |
8.6% |
8.9% |
9.1% |
8.3% |
8.7% |
8.9% |
9.5% |
9.1% |
8.9% |
|
1/10 |
2/10 |
3/10 |
4/10 |
5/10 |
6/10 |
7/10 |
8/10 |
9/10 |
10/10 |
11/10 |
12/10 |
|
10.1% |
10.2% |
9.7% |
9.2% |
9.6% |
9.4% |
10.1% |
9.0% |
9.4% |
9.1% |
8.8% |
8.3% |
|
1/11 |
2/11 |
3/11 |
4/11 |
5/11 |
6/11 |
7/11 |
8/11 |
9/11 |
10/11 |
11/11 |
12/11 |
|
9.3% |
9.0% |
8.5% |
8.5% |
9.4% |
9.7% |
9.4% |
8.6% |
|
|
|
|