Friday, December 04, 2009

Declining Job Losses Nothing to Celebrate

The good economic news today was that the economy only shed 11,000 jobs in November, giving Wall St. cause for celebration.

However, it was the 23rd consecutive month of job losses – the longest losing streak since the 1930s.

Indeed, jobs losses must decelerate before ceasing, and losses must cease before net job creation is realized. But amid all this hubbub, one thing cannot be overlooked: the U.S. economy is still losing jobs every month.

Two years since the start of the Great Recession, nearly 8 million jobs have been lost. In fact, all job creation for the entire decade has been destroyed and is now negative. That hasn't happened since the Great Depression of the 1930s.

The fact is, there are twice as many unemployed people today as there were two years ago at his time.

Though the labor market has seen a steady decline in first-time jobless claims, and Initial claims have fallen five weeks in a row, it's not the layoffs that are hurting us as much as the lack of hiring.

In essence, while fewer people are being laid off, fewer are being hired as well.

Nearly six million of the 15.7 million people officially classified as unemployed have been out of work longer than six months. And that doesn't count the part-timers who cannot find full-time work, or those who have simply given up looking.

About 2.3 million persons were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

There are 9.28 million people working part time, but who want a full time job. A year ago the number was 7.3 million. Employers will start increasing the hours of part-time workers before they start hiring full-time workers. This should give us pause.

Truthfully, all of these facts should temper some of the jubilation about a potential recovery.

The so-called U-6 unemployment figure still remains above 17%. This figure counts all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc.

Many of these job losses will be permanent. Millions of Americans will have to find new jobs or even new careers, which will be a lengthy process. The economy is both restructuring and recovering at the same time.

Service-producing industries added 58,000 jobs, while goods-producing industries cut 69,000 jobs. This is exactly the wrong kind of job creation, and the continuation of a decades-long pattern.

For far too long we've consumed too much and produced too little. We need to recover our manufacturing base in a hurry.

Unfortunately, there are continually fewer high-skill, high-paying jobs. In their place are evermore low-skill, low-paying service jobs.

"Hi, welcome to Wal-Mart," and "Hello, welcome to McDonald's, can I take your order?" have become all too common refrains for far too many educated and overqualified workers.

According to Lawrence Katz, a labor economist at Harvard, for every job that becomes available, about six people are looking. That creates an enormous amount of competition and leaves many out of luck.

Here's the reality check:

The government says that 1.3 million jobs need to be created every year from 2006-2016 just to keep up with the growing labor force. The hole we're in is very deep. Experts note that it will take years to reverse these massive losses.

Even if the nation could add 2.15 million private-sector jobs per year starting in January 2010, it would need to maintain this pace for more than 7 straight years (7.63 years), or until August 2017, to eliminate the current jobs deficit.

Washington, Wall St. and the mainstream media should hold of on the celebrating for now. The recovery hasn't really started yet. And whenever it does, there's still a very long road ahead.

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