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

10 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

 
 
 

16 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
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dew ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into by robber ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan Raky ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minis ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ i ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million in compensat ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industr ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

8 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an a ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

8 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Ba ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

8 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Skyway (Kidex) today. ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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

'Blue' light at dimly-lit places keeps workers healthy
London, July 31 (IANS) In a first, researchers have shown that a particular kind of artificial light is capable of ensuring that biological rhythms of our body clocks are correctly synchronised despite the absence of sunlight.
 
 
US military women less likely to drink than civilians: Study
New York, July 31 (IANS) A survey of US military veterans has revealed that female veterans are actually less likely to drink than their civilian counterparts.
 
 
Protein can prevent brain damage from toxic chemicals
New York, July 31 (IANS) Engineering a protein, research shows, may prevent brain damage in civilians and soldiers exposed to poisonous chemicals - particularly those in pesticides and chemical weapons.
 
 
IPad Air Giveaway 2014 is Online
IPad Air Giveaway 2014 is Online
Our sister site I4U News is giving away a brand new iPad Air or if you can wait an iPad Air 2. This is an $499 value.
 
 
 

Latest from the Network

Amalraj-Madhurika lose in TT mixed doubles fourth round
Glasgow, July 31 (IANS) India's Anthony Amalraj and Madhurika Patkar lost in the fourth round of the mixed doubles table tennis event of the 2014 Commonwealth Games at the Scotstoun Sports Campus here Thursday. The...
Read more on Sport Balla
 
Ukrainian parliament rejects PM's resignation
Kiev, July 31 (IANS) The Ukrainian parliament Thursday rejected the resignation tendered by Prime Minister Arseny Yatsenyuk last week, the parliamentary press service said. Yatsenyuk's resignation was backed by only...
Read more on Politics Balla
 
'Blue' light at dimly-lit places keeps workers healthy
London, July 31 (IANS) In a first, researchers have shown that a particular kind of artificial light is capable of ensuring that biological rhythms of our body clocks are correctly synchronised despite the absence of...
Read more on Apple Balla
 
US military women less likely to drink than civilians: Study
New York, July 31 (IANS) A survey of US military veterans has revealed that female veterans are actually less likely to drink than their civilian counterparts. Women react differently to their experience in the...
Read more on Apple Balla
 
Protein can prevent brain damage from toxic chemicals
New York, July 31 (IANS) Engineering a protein, research shows, may prevent brain damage in civilians and soldiers exposed to poisonous chemicals - particularly those in pesticides and chemical weapons. A set of...
Read more on Business Balla
 
Paddlers Sharath, Shamini in mixed doubles quarters
Glasgow, July 31 (IANS) India's mixed doubles table tennis pair of Sharath Kamal and Shamini Kumaresan advanced to the quarter-finals of the 2014 Commonwealth Games here Thursday. The Indian duo recorded a hard fought...
Read more on Sport Balla
 
Alicia Keys pregnant with second child
Los Angeles, July 31 (IANS) Singer Alicia Keys and musician Swizz Beatz' family is getting bigger. Alicia announced that they are expecting their second child. She took to Instagram on her fourth wedding anniversary,...
Read more on Celebrity Balla
 
Jeff Bridges unsure whether to slow down
Jeff Bridges can't decide whether to relax or work harder as he is getting older. The 64-year-old actor worries his time is running out so thinks he needs to cram in as much as possible, but has a conflicting feeling...
Read more on Celebrity Balla
 
Robert Pattinson embraces anxiety
Robert Pattinson ''likes'' his feelings of anxiety. The 28-year-old actor has considered seeing a therapist but doesn't know how helpful it would be, and feels lucky his bouts of feeling low never last very long. He...
Read more on Celebrity Balla
 
Kelly Osbourne sued by landlord
Kelly Osbourne has been accused of letting her dogs poop all over her apartment. The 'Fashion Police' host has taken legal action against her former West Hollywood landlord for keeping her security deposit when she...
Read more on Celebrity Balla