Sunday, March 7, 2010

Jobs Market Turning but Unhealthily

I missed this from the late week news:

NFIB Jobs Statement: Small Business Hiring Remains Negative

WASHINGTON, March 5, 2010 — William C. Dunkelberg, chief economist for the National Federation of Independent Business, the nation’s leading small business organization, issued the following statement on February job numbers based on NFIB’s monthly economic survey that will be released on Tuesday, March 9. The survey was conducted through February 28 and reflects 799 small business owner respondents:

“In February, small business owners reported a seasonally adjusted decline in average employment per firm of negative 0.13 workers during the prior three months, an improvement from the January reading of negative .52 workers per firm. Ten percent of the owners increased employment by an average of 5.0 workers per firm, but 19 percent reduced employment an average of 3.2 workers per firm (seasonally adjusted). Lower layoffs and jobs from new firms should produce a better jobs number, but it won’t be great. There still isn’t any energy in hiring.

“The net percent of owners planning to create new jobs remained unchanged at negative 1 percent. Not seasonally adjusted, 13 percent plan to increase the total number of people working for them, while 8 percent plan workforce reductions.

“There is no pressure on compensation in this labor market. Few owners complain of a lack of qualified workers for their job openings. Not seasonally adjusted, a record high 12 percent reported reductions in labor compensation.”

Reading between the lines, more workers are finding jobs but only by accepting diminished wages. The labor market is clearly turning but in an unhealthy manner. Whereas the Carter-era and early Reagan-era recessions were inflationary ("Fire"), we are experience "Ice" now. Think Japan.

In economic terms, it should not matter whether your pay rises 5% and what you purchase rises 10%, or your pay drops 5% and what you purchase stays even (tax issues and the like ignored for purposes of discussion).

One way or the other, the U. S. economy has become unbalanced. Consumer prices are rising and wages are not rising to keep pace. Where is the difference going? Think surging BRIC countries, oil exporters and the insiders in privileged Big Finance and Big Business spheres. Why does Goldman Sachs pay its owners--shareholders-- a mere 1% dividend yield when insiders routinely skim off half the profits first? Because it can.

Big Finance pay practice are but one of many imbalances.

Let us hope that the Fed and the administration stop the money-printing. One way or another, accounts will balance. People need to see if they are simply being outcompeted for foreign oil who are hungrier for what the benefits it can provide and who can turn around and outcompete America in producing goods and services that the world needs, and whose societies are not bearing the chronic burden of fighting war after war in remote places.

The solution is either to accept continued relative economic decline or build on this country's strengths in knowledge-based industries that China and Brazil can't compete in simply by throwing cheap labor at the topic. Our strengths include medical and high-tech fields. The absolute wrong solution is to tax medical equipment makers as proposed by the Party in power. The correct solution is a national push to grow those industries and others such as cost-efficient pro-environment like crazy. The wrong solution is to continue massive subsidies to things that do not aid international economic competitiveness, such as residential housing.

The right solution involves propounding a big picture view of a successful American economy, which vision will provide America with a blueprint for the future that would be real change that we all could believe in.

Neither major Party is close to such a vision. They are mired in the status quo muck that few believe in anymore.

Copyright (C) Long Lake LLC 2010

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