Saturday, December 5, 2009

Is Economic Recovery Just Around the Corner????

Are we at the bottom of the fall in employment?  Hard to say for sure but a net loss of "only" 11,000 jobs is significant given the situation for the last 9 months or so.  We are still going to behind the 8-ball for a long time, however.  It is estimated that the US economy must created at least 125,000 rto 150,000 net NEW jobs EVERY month to keep up with population increases (immigrants/birth rate) AND new entrants into the job market (yes, that is you graduating high school student and/or graduating college student!).  So when we start the economic recovery we will still be behind, technically, by 1 to 2 million jobs. There are a couple of charts in the WSJ today that are informational.  This one...

has a couple of interesting points. The number of temporary workers hired helped stem an increase in the unemployment rate.  Businesses are hesitant to hire permanent workers right now for a couple of reasons.  One, the spike in GDP (demand for new goods and services) is encouraging to businesses, but there is uncertainty as to the sustainability of that demand.  Statistically, few businesses are going to add to their workforce if they are unsure that new orders for their products/services are going to be demanded longer-term.  What they will tend to do is hire temporary workers, if needed, to fill in labor gap they may be experiencing in production.  Second, perhaps along with, or before, hiring temporary workers, businesses will give "extra" hours to workers who had their hours cut because of lack of demand for their good/service.  As you can see from the chart, the average work week increased slightly.  There is still under-utilized capacity in most businesses so, the prudent business owner is going to try to get the most out of the trimmed down workforce as possible (and the workers may be greatful for the increased hours/overtime) before realizing it will be more cost effective to hire additional workers as they reach/surpass capacity.  Only then will "new" (NOT jobs that were lost then the SAME job re-filled --that is NOT job creation!!)  jobs be actually created. 
The second chart shows where the jobs were lost and where gained...

We know 7,000 of the "new" jobs were created in the public sector and most (I assume) of the Education AND  probably a good portion of the healthcare jobs (approx half of all healthcare spending originates from government, Fed/State).  These jobs are ALL taxpayer financed and are made possible by revenues from individuals, business, or borrowing (since revenues are falling and these plans are not already budgeted, I am guessing they are paid for with borrowed money).  I am sure a good number are residuals of the fiscal stimulus that makes its way through the bureaucracy and necessitates the hiring of people to oversee the vast sums of money going to designated "shovel-ready" projects.  My question is, will these jobs disappear when the stimulus money runs out or are they going to be so embedded that they will be impossible to eliminate?  Does this lead to a permanently enlarged public sector?  Is this good? Bad? or will the economic growth resulting from it be so significant that these jobs will eventually pay for themselves?  Whaddaya think???

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