360° Coverage : The Chronic Sickness of the US Labor Market

2 Updates

The Chronic Sickness of the US Labor Market

Apr 4 2014, 9:44am CDT | by

Special thanks to Robbert Van Batenburg of Newedge who Co-Authored this report. Today’s jobs report is once again a testament to the malady of the US labor market. While the total number of people...

Filed under: news

 
 
 

25 weeks ago

The Chronic Sickness of the US Labor Market

Apr 4 2014, 9:44am CDT | by

Special thanks to Robbert Van Batenburg of Newedge who Co-Authored this report.

Today’s jobs report is once again a testament to the malady of the US labor market. While the total number of people employed increased by a seemingly impressive half a million, a whopping 83% of those job gains came from temporary workers. Note that the half a million job gains is derived from the household survey of the US jobs market, which covers more of the labor market than the non-farm payrolls. It is also this enigmatic household survey that generates the national unemployment rate.

The US labor market is sick. More than five years after the failure of Lehman Brothers, the number of full time employed workers in the US is still 4 million less than in December of 2007.  

Year      US Population    Full Time Employed     % of Pop.

2000           281.4ml                   114.3ml                                 41%

2007           301.6ml                   121.6ml                                 40%

2013           316.7ml                   117.3ml                                  37%

The thought making economists sweat is that we are looking at a US labor market which has been unable to absorb all the people coming into the labor force.

From 2007 till today, the working-age population has increased by a total of 13 million but there are 1.3 million fewer people employeds than in 2007.  Like a million man march for jobs, this means that millions of people who joined the national work force were never able to find a job. What makes this so troubling is that young entrants to the labor force who fail to find a job will be less productive for almost their entire working lives.

In the first few years after people enter the labor force, they enjoy the steepest learning curve. So the average worker who starts his or her career in their mid-twenties has the most to learn and learns the quickest. By the time this worker reaches their early to mid-thirties, the learning curve levels off as they reach their peak earnings and productivity years.

However, if labor market entrants struggle for years to find their first job they are set-back several years in terms of on-the-job skills. So during what should be the worker’s peak earning years either salary or productivity or both fall short due to lack of experience.  This is why rising youth unemployment, those 18-29, is such an eye opener.

According to the Millennial Jobs, the declining labor force rate has created an additional 1.95 million young adults that are not counted as “unemployed” by the U.S. Department of Labor.

The current unemployment rate for youngsters aged 18-29 is 22%, this is adjusted for those who have “given up” looking for work.  When you look at the non-giver-uppers, it’s 11.4%, that’s nearly double overall unemployment rate of 6.7%.  Maybe this is why politicians make such an effort to get out the youth vote.  Is Washington buying votes, paying people not to work in this “strong” economic recovery?

 Year     US population (000)    Labor Force          Not in labor force
2000        281,422                                 141,489                             69,254
2007        301,621                                  153,866                             79,290
2013        316,739                                   154,937                             91,808/>/>/>

Global corporations are increasingly agnostic to the citizenship and location of their workers and will direct jobs and investment capital to the location with the highest potential return on capital. If Toyota or Microsoft find more productive employees in Shanghai and Munchen then in Dallas and Seattle, they will act accordingly. To wit, non-farm productivity in America has shown anemic growth in the last four years but unit labor costs are close to all time highs. In other words, American workers have never been as expensive as they are today, but are not becoming more productive.
/>

The Dissapearance of Corporate Investment

It’s a fact, US corporations just don’t trust the economic recovery.  Even more, CEOs detest the lack of regulatory and tax visability comming out of Washington.  The more the President and Congress publicly condem eachother, the more CFOs are sitting on their cash and NOT investing in job creating innovations.

S&P just reported on unprecedented levels corporate cash hoarding, but crucial capex is 25% off historical normal levels.  Capex is capital expenditures, job creating corporate investment./>/>

Companies Investing?

 From 1994-2000 capex growth moved from 5% to 30% and the stock market exploaded higher. Today, capex growth is flat lining.

2013 0%
2012 +11%
2011 +18%
2010 +26%/>/>/>

Newedge Data

From 2011-13: US Corporate Cash Cash Pile Rose to $3 Trillion

 In recent years, if US corporations had used a normal, historical use of cash, a stunning $900 billion would have been positioned in job creating investment. 

The problem does not stop here.  The declining participation rate is a well-known. This number tells us that a declining portion of the working-age population in the US is in the labor force. The growing cadre of baby-boomers that are retiring cannot explain away this phenomenon. The very young people are also increasingly being left behind. In 2007 the participation rate for workers below 20 years of age was 41% but has now dropped below 33%. The unemployment rate in this group is currently 22% vs. around 16% in late 2007.

The underlying story here is that post-2008 US labor market seems incapable of employing young workers without a college education and as a result, more and more of these workers never find a job and become structurally unemployed. This creates a European-style underclass of people that trapped in a permanent life on welfare. The proof is in the details; among the more than 10 million people that are unemployed, close to 65% is unemployed for more than 2 weeks. Before the “great recession” only around 30% of the unemployed were out of a job for more than 2 weeks. In those days, a lot of workers decided to resign from their current job to find a better one elsewhere; a sign of a healthy labor market. Today, the majority of unemployed are long-term unemployed. 

The end result of the ailments of the US labor market is that fewer workers are financing a growing army of people that are relying on government support in one form or another. The government is taking an increasing portion of the paychecks of this shrinking workforce to finance all these support programs. While costs per worker increase, productivity is not and this is a rising deterrent for global corporations to invest and employ in America. Accordingly, the downward spiral of shrinking employment and rising costs becomes clear and we need to look no further than Europe to see what the future holds.  Europe is laboring under the seeming oxymoron of both a declining labor force and structurally high unemployment. 

Every day “change” in America represents a Europification of America.  While not working together, politicians in Washington are creating structural unemployment on this side of the pond.  They’re building an ugly foundation resting American job seekers in a system layered in new wet cement.   These burdens on the US  job market must be reversed before it dries.

 
Update
2

4 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing the workforce of 20,000 by ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

4 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of M ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Man dies two years after being struck by stray bullet
Santiago, Sep 30 (IANS/EFE) A 23-year-old Chilean man died after two years in a persistent vegetative state as a result of being shot in the head unintentionally by a law enforcement officer during a student protest in October 2012, his family said Monday.
 
 
Over 2,000 Germans volunteer to help battle Ebola
Addia Ababa, Sep 29 (IANS) Over 2,000 Germans have heeded the government's call to register as volunteers for deployment to fight the Ebola virus disease outbreak in Guinea, Liberia and Sierra Leone, the African Union (AU) said in a statement Monday.
 
 
India open minded, wants change, Modi tells top US executives
New York, Sep 29 (IANS) India is open-minded and wants change, Prime Minister Narendra Modi told top executives of American companies, including Google and Citigroup, during a high-powered breakfast meeting here Monday.
 
 
World hunger falls but 805 mn still chronically under-nourished: FAO
Abu Dhabi, Sep 29 (IANS/WAM) Despite the overall progress made in global hunger reduction, 805 million people are estimated to be chronically undernourished in 2012-14, down more than 100 million over the last decade, and 209 million lower than in 1990-92, the UN's Food and Agriculture Organisation (FAO) said Monday.
 
 
 

Latest from the Network

I nearly died: Phil Collins
Los Angeles, Sep 30 (IANS) Veteran musician Phil Collins says he was forced to quit drinking after he was diagnosed with a severe case of pancreatitis. The 63-year-old says he began drinking heavily after stepping...
Read more on Celebrity Balla
 
Sea turtles find safe haven in Costa Rican national park
Tortuguero (Costa Rica), Sep 30 (IANS/EFE) Nestled in the Costa Rican Caribbean is Tortuguero, a small village surrounded by fresh water, the sea and the splendours of nature that it has learned to preserve for its own...
Read more on Politics Balla
 
UN welcomes inauguration of new Afghan president
United Nations, Sep 30 (IANS) The UN Security Council welcomed the inauguration of new Afghan President Ashraf Ghani Ahmadzai, which marks the first ever peaceful transition of power in the country. The Security...
Read more on Politics Balla
 
Argentine inventor of vanishing spray slams German ban
Buenos Aires, Sep 30 (IANS) Argentine inventor of football's vanishing spray, Pablo Silva, denied claims made by Germany calling the product "unsafe." The canned foam, used by referees to mark the spot players should...
Read more on Sport Balla
 
Amalraj-Madhurika eliminated in mixed doubles TT pre-quarters
Incheon, Sep 30 (IANS) The Indian mixed doubles table tennis team of Anthony Amalraj and Madhurika Patkar was eliminated in the pre-quarterfinals of the 17th Asian Games here Tuesday. The Indian pair lost 1-3 (5-11,...
Read more on Sport Balla
 
AZ appoint Van den Brom as new coach
The Hague, Sep 30 (IANS) John Van den Brom has signed a contract until mid-2016 as head coach of AZ Alkmaar, where he will be assisted by former head coach Marco van Basten. AZ and the 47-year-old Van den Brom reached...
Read more on Sport Balla
 
Argentine crowned world youth chess champion
Buenos Aires, Sep 30 (IANS) Argentine Alan Pichot was crowned the under-16 world champion after beating Russian Maxim Litvinov during the World Youth Chess Championship in Durban, South Africa. The 16-year-old became...
Read more on Sport Balla
 
Jesse Tyler Ferguson's dad found his stash of gay porn
Jesse Tyler Ferguson's father found out he was gay at the age of 14 after he discovered his stash of gay porn. The 'Modern Family' star, 38, was just a teenager when his dad Robert learned he was homosexual after he was...
Read more on Celebrity Balla
 
Gwyneth Paltrow celebrates birthday with Chris Martin
Gwyneth Paltrow celebrated her birthday with her estranged husband Chris Martin over the weekend. The 'Iron Man 3' star marked her 42nd milestone with the Coldplay frontman, whom she spit from earlier this year...
Read more on Celebrity Balla
 
Ron Gardenhire Out as Minnesota Twins Manager
Ron Gardenhire is out as manager of the Minnesota Twins.Gardenhire, who had been the Twins' manager for 13 seasons, had a year remaining on the two-year contract extension he signed last year, per a Sept. 29 update from...
Read more on Sport Balla