Where Are the Jobs??$#!?!!

June 3rd, 2012 at 5:35 pm

That’s the good question that led off an interview I did today with Alex Witt on MSNBC.

My answer is largely the same as it’s been, and much what you’d expect from those of us who’ve long focused on the demand side of the equation:

–the job market is still suffering from weak labor demand, which is itself derived from still-relatively-weak demand for the goods and services our firms produce;

–we’ve never really hit the virtuous cycle where growth begets jobs, begets paychecks, begets rising consumer demand, feeding back into growth, jobs, etc.;

–instead we’ve been stuck in a more vicious cycle where employers have been able to meet what demand there has been with only slight additions to their workforces;

Whenever this discussion of jobs comes up, I strongly recommend starting from the place that a) we’re a 70% consumption economy (71.2%, most recently, in fact) and b) labor demand is derived demand, i.e., derived from consumer/investor demand).  If households’ balance sheets are still fragile, if most workers’ real wages and most families’ real incomes aren’t going anywhere (see figure), if home values remain depressed (although they’ve pretty much stopped falling, which is good), if investors are largely sitting it out waiting for the virtuous cycle to get started—don’t expect to see much consistent strength on the jobs front.

Add in state/local layoffs, Europe, slowing China (and depreciated China currency, which hurts our exports), the premature fading of stimulus, and the threat of the fiscal cliff and another kill-me-now debt ceiling debate, and, well…there’s your answer.

For my next act post, I’d like to emphasize the wrong answer to this question of where are the jobs, i.e., they’re out there but begging for skilled workers to fill them.  I’ve heard that a lot lately, and while there’s surely something to it in some labor markets, it’s largely unsupported by evidence, especially on the wage side.  There’s really just no wage pressure of the type that simply must accompany unmet labor demand…until we see that, I’d recommend pretty deep skepticism on that front.

Like I said, figures on that to come…

Source: NIPA

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8 comments in reply to "Where Are the Jobs??$#!?!!"

  1. Sandwichman says:

    “the job market is still suffering from weak labor demand…”

    Maybe it’s time to look at BOTH sides of the equation, then: “______” AND demand!

    What if there has always been a method to the madness of Say’s Law “supply side” labor force policy but its purpose isn’t job creation?

    What if?

    “It is the wisdom of the ostrich, say you. No, by no means — it is the wisdom of Argus who sees everything with his hundred eyes and knows that the only thing that can oppose the spreading of a truth is the spreading of a lie.” — Arturo M. Giovannitti, 1912.


  2. perplexed says:

    “The futility of their policy and the want of sound reasoning behind it have been finally demonstrated by its failure even to secure a fall in the rate of interest. For, as we have seen above, if outlets for investment at home are stopped up, savings flow abroad on a scale disproportionate to our favourable balance of trade, with the result that the Bank of England tends to lose gold. To counteract this position, the bank-rate has to be raised.
    So in the end we have the worst of all worlds. The country is backward in its equipment, instead of being thoroughly up to date. Business profits are poor, with the result that the yield of the income tax disappoints the Chancellor of the Exchequer, and he is unable either to relieve the taxpayer or to push forward with schemes of social reform. Unemployment is rampant. This want of prosperity actually diminishes the rate of saving and thus defeats even the original object of a lower rate of interest. So rates of interest are, after all, high.
    It is not an accident that the Conservative Government have landed us in the mess where we find ourselves. It is the natural outcome of their philosophy:
    ‘You must not press on with telephones or electricity, because this will raise the rate of interest.’
    ‘You must not hasten with roads or housing, because this will use up opportunities for employment which we may need in later years.’
    ‘You must not try to employ every one, because this will cause inflation.’
    ‘You must not invest, because how can you know that it will pay?’
    ‘You must not do anything, because this will only mean that you can’t do something else.’
    ‘Safety First! The policy of maintaining a million unemployed has now been pursued for eight years without disaster. Why risk a change?’
    ‘We will not promise more than we can perform. We, therefore, promise nothing.’
    This is what we are being fed with.
    They are slogans of depression and decay—the timidities and obstructions and stupidities of a sinking administrative vitality.
    Negation, Restriction, Inactivity—these are the Government’s watchwords. Under their leadership we have been forced to button up our waistcoats and compress our lungs. Fears and doubts and hypochondriac precautions are keeping us muffled up indoors. But we are not tottering to our graves. We are healthy children. We need the breath of life. There is nothing to be afraid of. On the contrary. The future holds in store for us far more wealth and economic freedom and possibilities of personal life than the past has ever offered.
    There is no reason why we should not feel ourselves free to be bold, to be open, to experiment, to take action, to try the possibilities of things. And over against us, standing in the path, there is nothing but a few old gentlemen tightly buttoned-up in their frock coats, who only need to be treated with a little friendly disrespect and bowled over like ninepins.
    Quite likely they will enjoy it themselves, when once they have got over the shock”.

    -J.M. Keynes (Essays in Persuasion)

    The same strategies 80 years later; some justifications a little different, most the same. We argue about the Laffer curve when what we should be worried about is the inverted learning curve.


  3. Virgil Bierschwale says:

    Saw you on CNBC a few moments ago.

    This article I put together awhile back will show you where the jobs are.

    http://keepamericaatwork.com/?p=206493

    And why they continue to grow worse until we wake up.

    Think of it as niagra falls.

    We had tons of jobs.

    But then these people siphoned off the jobs to jumpstart the BRIC economies.


    The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. “His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled.

    http://www.theatlantic.com/magazine/print/2011/01/the-rise-of-the-new-global-elite/8343/

    While they were doing that, another group was siphoning from the BRIC countries which nullified the previous groups efforts.

    —-

    “We have been seeing wage inflation over the past several months,’’ said Chris Ruffle, who helps manage $19 billion as China co-chairman of Martin Currie Ltd. Rising salaries may prompt businesses that operate plants in China to move to lower-cost countries such as Vietnam and Cambodia, Ruffle said.

    http://keepamericaatwork.com/?p=202864

    —-

    The solution is very simple.

    Put Americans back to work at wages that pay more than what it costs to live in their community and they will do what they do best which is spend, which will jumpstart the global economy.

    Virgil
    Keep America At Work


  4. davesnyd says:

    I think it was Paul K in a column a couple months ago who pointed out that Germany’s economy grew in the 90s because it was based on exporting to the rest of Europe.

    I think the same can be said of China recently, Japan in the 70s, and the US in the 50s.

    I’m left wondering– is it possible to generate enough internal demand for an economy to grow? Do economies grow only at the expense (I guess; in a mercantilistic sort of way) of other country’s?

    If not, is that because of income inequality? If money were more evenly distributed, would demand increase enough to support growth? Or is it an intrinsic nature of the beast kind of thing?


  5. Chuck Becker says:

    I think that we’re in the middle of an economic revolution that ultimately will turn the power and prosperity balance of the world, the role of nation-states, and the opportunities for individual citizens as topsy-turvy as the Industrial Revolution did.

    Unskilled and semi-skilled human labor simply isn’t worth very much, any longer. Industrial automation has destroyed untold tens of millions of well-paid, typically unionized, jobs in America. That un/semi-skilled labor always has been and always will be the difference between prosperity and poverty. No matter how much we invest in education, no more than 30% of the population will be able to earn a middle class living with business, professional, or technical skills. Which leads to…

    With the emergence of the Internet and proprietary communications networks, almost all professional and technical workers who don’t have to touch their customers are under wage pressure from teleworkers in highly skilled but lower paid economies. Which leads to…

    In addition to the destructive force of industrial automation and telework, the highly optimized global transportation infrastructure is another obstacle to American-style jobs. The American auto industry grew up in Detroit because it was close and convenient to the iron ore of Minnesota, the coal of Pennsylvania, and the wood of Michigan, thereby avoiding the cost of shipping raw materials cross country. Today, that auto industry would be set up in Brazil, and the iron ore, coal, and wood shipped there for processing. The oceans used to provide natural isolation and protection for certain production industries, but no longer.

    This is the grim reality for America (although less grim than the reality that Europe faces). We can’t innovate our way out of it because innovations nowadays are so portable. We cannot borrow and spend our way out of it because the demand we create here results in jobs over there. The only rational course at this point is to first, explain this situation to people … no more denial or finger-pointing. Second, we need to take a realistic inventory of America’s assets and figure what we have that we can capitalize on to recreate American prosperity. Finally, Americans must be made to understand that the solution depends on them, that the government cannot do for people what they will not do for themselves and for each other.


    • perplexed says:

      These are old arguments in new costumes. Possibly you missed this part of the Keynes quote above?:

      “It is not an accident that the Conservative Government have landed us in the mess where we find ourselves. It is the natural outcome of their philosophy:
      ‘You must not press on with telephones or electricity, because this will raise the rate of interest.’
      ‘You must not hasten with roads or housing, because this will use up opportunities for employment which we may need in later years.’
      ‘You must not try to employ every one, because this will cause inflation.’
      ‘You must not invest, because how can you know that it will pay?’
      ‘You must not do anything, because this will only mean that you can’t do something else.’
      ‘Safety First! The policy of maintaining a million unemployed has now been pursued for eight years without disaster. Why risk a change?’
      ‘We will not promise more than we can perform. We, therefore, promise nothing.’
      This is what we are being fed with.
      They are slogans of depression and decay—the timidities and obstructions and stupidities of a sinking administrative vitality.
      Negation, Restriction, Inactivity—these are the Government’s watchwords. Under their leadership we have been forced to button up our waistcoats and compress our lungs. Fears and doubts and hypochondriac precautions are keeping us muffled up indoors. But we are not tottering to our graves. We are healthy children. We need the breath of life. There is nothing to be afraid of. On the contrary. The future holds in store for us far more wealth and economic freedom and possibilities of personal life than the past has ever offered.
      There is no reason why we should not feel ourselves free to be bold, to be open, to experiment, to take action, to try the possibilities of things. And over against us, standing in the path, there is nothing but a few old gentlemen tightly buttoned-up in their frock coats, who only need to be treated with a little friendly disrespect and bowled over like ninepins.
      Quite likely they will enjoy it themselves, when once they have got over the shock”.

      -J.M. Keynes (Essays in Persuasion)


  6. Misaki says:

    >if most workers’ real wages and most families’ real incomes aren’t going anywhere (see figure),

    As pointed out at http://jaredbernsteinblog.com/slack-attack/ and probably more recent posts as well, wages are helped by full employment. This does not mean everyone has to be trying to work 40 hours per week; only that they have about as much work as they want to work and are resistant to working more.

    Real income is less important than the difference between labor demand and labor supply. Although doesn’t the CPI work off of actual volume of goods sold at each price..? So if people suddenly start buying non-branded goods it will show up as deflation, or a rise in real income.

    Job creation without government spending, inflation, or trade barriers: http://jobcreationplan.blogspot.com/


  7. Misaki says:

    >I’d like to emphasize the wrong answer to this question of where are the jobs, i.e., they’re out there but begging for skilled workers to fill them.

    I like this post linked to by Paul Krugman: http://macroblog.typepad.com/macroblog/2012/06/the-skills-gap-still-trying-to-separate-myth-from-fact.html

    Basically, what it seems to show is that employers became “spoiled” by the labor market during the recession, where experienced workers were willing to work for low wages. It took a while for them to adjust their applicant standards; and now, with the labor market slowly becoming slightly more normal, they’re upset that many skilled job categories no longer have a surplus of experienced workers. Instead they have to settle for recent college graduates which is totally unacceptable. Don’t these people understand that they need to find a different company to work at for a few years first before applying to an elite business?!

    Job creation without government spending, inflation, or trade barriers: http://jobcreationplan.blogspot.com/


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