Those looking for good news in the U.S. labor market are increasingly being forced to scrape the bottom of the statistical barrel.
Optimists pointed to the 34,000 increase in temporary workers in the otherwise bleak October employment report. Temp hiring has traditionally been seen as a sign that companies are dipping their toes in the water before creating full-fledged positions.
This looks like wishful thinking. A more plausible reading is that businesses remain skeptical about the recovery and will remain reluctant to commit to full time hires.
A lack of faith among companies could be self-fulfilling. Johnson & Johnson’s recent decision to cull up to 7 percent of its workforce was justified — in somewhat circular fashion — by the impact of rising unemployment on consumer spending. Many other companies are likely to be making a similar calculation.
Even long into the recovery, businesses may still prefer to meet rising demand by using temporary workers. The number of workers stuck in part-time jobs has been rising relentlessly. In October, the unemployment gauge that includes involuntary part-time workers rose to 17.5 percent, from 12 percent last year.
Even as output starts to expand again, landing a job is getting ever harder. A year ago, almost a third of Americans losing their jobs managed to clamber back into employment in less than five weeks. Now just 20 percent are so lucky.
Instead, the average worker is languishing for more than six months without work. Businesses are still shedding jobs at a remarkable pace. The average jobs loss of the past three months of 188,000 — while well below the lofty heights of winter 2008 — is still close to the peak levels seen in recent recessions.
Individually, companies are right to be cautious. As government stimulus measures fade, consumers may lapse back into pessimism.
American households have barely made a dent in their record debts. Wage increases, meanwhile, remain stingy and credit harder to come by. But as the job slump continues there is a mounting danger that the pessimism of businesses and consumers will feed off each other.
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“Stimulus should first go to tax payers and small businesses in distress.”
Part of the stimulus package in February was tax cuts for the middle class. While tax cuts for the poor and middle class do stimulate the economy, they are not nearly as effective as funding well defined projects that create new jobs. Funding projects should be the focus of any further stimulus, not tax cuts. It’s as if people have already forgotten the 2001 and 2003 tax cuts. How’d that work out for us?
Small businesses are benefitting from the current stimulus. Many of the stimulus funded road projects are handled by small construction companies. These companies have had to hire new workers to get the projects done. This is exactly the type of stimulus we need. The money from this type of stimulus spreads its tentacles out into many different sectors as the new hires spend on consumer goods and the businesses spend on machinery and materials. All of this leads to additional job creation in areas that did not directly receive stimulus money. This is priming the pump.
Project related stimulus will put us on a path to sustainable job growth. Tax cuts simply pull the rug out from under the economy after stimulus ends.
- Posted by Kirk…and Christopher, of course, hopefully not a Dustbowl Grapes of Wrath, East of Eden.
- Posted by Depeche Mode