Issue Date: April 14, 2008
Job Market Blues
U.S. employment peaked in December 2007. The month marked the end of a weak and relatively short period of job growth. This period generated a 6% increase in payrolls and lasted for 52 months. The growth phases of the eight earlier bust-and-boom employment cycles since 1948 produced average payroll gains of 18% and lasted an average of 67 months.
Prior to this one, the two most recent job upturns—from 1982 to 1990 and from 1991 to 2001—both posted payroll gains of close to 23% and lasted for 90 and 117 months, respectively. The down phase of the first eight job cycles lasted an average of 12 months. For the just completed ninth cycle, it took 30 months to hit bottom.
These sobering statistics and the near-halt to growth in the gross national product in the fourth quarter of 2007 should have brought an end to denial and obfuscation about the economy. But they apparently haven't.
In recently acknowledging some economic weakness, the Bush Administration still boasted that the latest job recovery beat the previous record of 48 months of uninterrupted month-to-month gains. This is true but misleading.
During the boom phase of earlier employment cycles, payroll estimates occasionally showed isolated and tiny month-to-month declines. But they did not break the upward momentum. More than four years of uninterrupted growth may be a talking point. But what matters about an employment upturn is not perfect uninterrupted growth but how long it lasts and how many jobs it generates in the end.
The publisher of Forbes, the self-styled "Capitalists' Tool," as recently as last month assured the magazine's readers about four economic matters they need not be pessimistic about. To wit:
The 70% of Americans who believe the U.S. is on the wrong economic track—because they are essentially the same 70% who disapprove of the Bush presidency in general and so are not commenting just on the economy.
What the media is reporting about the economy—because it is an election year and the "out party" always exaggerates anything negative about the economy, and the media goes along.
What business journalists write anyway—because they are mostly incompetent, antibusiness, and left-of-center.
The subprime mortgage crisis—because the related losses are not large. "In any typically volatile trading day, U.S. stocks gain and lose [as much] every hour," the publisher writes.
Incidentally, in the same Forbes issue, the editor-in-chief proclaimed there is "no way" carbon dioxide has anything to do with world temperature changes.
For Democrats, a tempting partisan explanation for what's going on with the economy is that it's what you'd expect when a Republican is in the White House. A ranking of the four-year presidential terms since 1948 by the percentage payroll gains they witnessed reveals that the six Democratic terms take six of the top seven spots. Republicans take fourth and the lower eight positions.
Striking as these data may appear, they do not establish cause and effect. There are too many complications, such as the finite economic powers of the White House and the times Congress and the presidency are split between the parties. And when there has been a party change in the White House, there is the inevitable cry from the new Administration that it was left an economic mess. The counterclaim by those leaving is that any economic success that the newcomers may enjoy is due to the solid economic foundation they were handed.
The current wars are probably not a factor in the job downturn; the U.S. has a record of flourishing during wartime. Demographics are not a factor because the workforce continues to grow at a steady pace. And although all data from the Bureau of Labor Statistics may not be ideal, the agency is widely regarded as scrupulous, consistent, and credible with its measures of employment.
This puts focus on the current turmoil in the financial and credit markets and the devaluation of the dollar—which aren't helping—as well as on technological change, worldwide competition, and the outsourcing of jobs overseas. Was 1992 third-party presidential candidate Ross Perot onto something with his little charts and his alarm over the "giant sucking sound" of U.S. jobs going overseas?
What are the implications of an economy able to generate ever- increasing wealth, mostly for those who can afford it, without consistently generating enough living-wage jobs to keep up with population growth?
Despite some painful times, the U.S. did quite well from 1948 to 2000 overall. Payrolls fell for only 15% of the time and never by more than about 3% in the past 50 years. Percentage payroll gains during the upturns since 1948 exceeded losses during the downturns by 6 to 1.
During the 2001 to 2007 cycle, however, payrolls declined 37% of the time and payroll gains exceeded losses by a narrower 3 to 1.
The relatively high labor costs in the U.S., combined with today's technology and the new phenomenon of a truly competitive world economy that technology is rapidly engendering, do not augur well for the domestic workforce.
Avoiding a tipping point for U.S. employment will be a great challenge to the nation's policymakers, business leaders, and science technology communities. How long can faith in the ability to provide services and to produce goods ever more cost efficiently—which includes the lowest possible domestic labor costs—continue to be seen as the bedrock of a sustainable and healthy U.S.? Maybe it is time to think more broadly.
Views expressed on this page are those of the author and not necessarily those of ACS.
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