Friday, December 03, 2010

Bright Spots: Temp Help and Mfg. Overtime Hours; But Jobless Recovery May Continue to 2012

Today's disappointing BLS employment report reflects a fairly weak job market and a continuation of the "jobless recovery" that will likely continue well into 2011, maybe even into 2010.  Looking back at the periods following the last two recessions, the jobless rate continued to rise for 15 months (until June 2002) following the end of the recession in March 19991, and it took 29 months, until August of 1993, before the unemployment rate fell back to the same level that prevailed at the end of recession.  Following the 2001 recession, the jobless rate continued to rise for another 19 months (June 2003), and it took 32 months until July 2004 for the jobless rate to return to the same level as the month of the recession's end in November 2001.  If this recovery follows the same pattern, it might be 2012 before this "jobless recovery" ends. 

Several bright spots in today's jobs report include:

1. Employment in temporary help services continued to grow by 39,500 jobs in November, which is the 13th increase during the last 14 months.  Since the cyclical low of 1.724 million jobs in September 2009, there has been an increase of 494,000 jobs in the temporary sector to 2,218 million jobs in November.  That level of temporary and contract employment jobs is the highest since September of 2008, 26 months ago. 

2. Average overtime hours for the manufacturing sector reached a 31-month high of 4.0 hours per week in November, the highest level since April 2008. 

Taken together, it appears that many U.S. companies are meeting the increasing demand for their products and services by:  a) using temporary and contract employees instead of hiring permanent, full-time employees, and b) using existing employees more intensely with increased overtime hours in the manufacturing sectors.  Both of those factors would be characteristic of an economy that is in recovery measured by production, income and sales, but is not yet creating enough full-time permanent jobs to bring down the overall jobless rate.     

Update: See the always-insightful analysis here from Scott Grannis, who writes "Despite the failure of job growth to pick up, there is no sign that it is slowing down. The economy continues to plod ahead at a slow pace. If this keeps up, and worker productivity rises at its long-term average pace of 2% per year, then we can expect to see about 3.5% real GDP growth going forward."

And here's some commentary from Brian Wesbury and Bob Stein on today's report: "Given recent data on consumer spending as well as growth in manufacturing production and construction, the underlying trend in job growth should accelerate in the months ahead."

12 Comments:

At 12/03/2010 10:35 AM, Blogger morganovich said...

"Taken together, it appears that many U.S. companies are meeting the increasing demand for their products and services by: a) using temporary and contract employees instead of hiring permanent, full-time employees, and b) using existing employees more intensely with increased overtime hours in the manufacturing sectors. Both of those factors would be characteristic of an economy that is in recovery measured by production, income and sales, but is not yet creating enough full-time permanent jobs to bring down the overall jobless rate. "

it would also be consistent with an economy in which employers face large and not entirely predictable costs around healthcare because of the new obamacare bill and are holding off on/avoiding hiring full time workers to avoid these costs or to at least figure out what they are.

if you raise the cost of full time labor (as obamacare does) then employers will demand less of it.

it may also signal the accelerating shift of many small companies to labor forces that are entirely contract based. all our employees work this way. it's better for everyone. they get much more favorable tax treatment and we get much less government interference in our payscales and get lower costs. we don't do this to keep wages low or to avoid benefits (everybody here makes $100k+ and has health care). we do it because it is tax efficient.

hauser's law manifests itself yet again.

 
At 12/03/2010 11:10 AM, Blogger Cash212 said...

Professor Perry, are you really censoring posts that are in disagreement with your post and politely critical of your blog? What happened to integrity?

 
At 12/03/2010 11:54 AM, Blogger bix1951 said...

what is a job?

 
At 12/03/2010 11:55 AM, Blogger Robert said...

Let us view a video that may help shape a better future. Go to http://www.youtube.com/watch?v=XdTQTde3TQ0 and follow the link in the description box to help support this creative method for delivering a powerful message to those who would not normally pay attention!!!

 
At 12/03/2010 12:30 PM, Blogger Mark J. Perry said...

Cash212: Please try again, the first one was suspected as spam, and got sent to the area that requires moderation. It was deleted along with some actual spam by mistake.

 
At 12/03/2010 1:06 PM, Blogger Ron H. said...

"what is a job?"

bix

I recall my dad telling me about "jobs". When you have a "job", you have to get up really early in the morning, gulp down some coffee, and then drive off to some place you don't want to be. After spending all day there, you drive home in time to eat a cold dinner, then go to bed.

Can you imagine? It's hard to believe people actually used to live like that.

 
At 12/03/2010 1:10 PM, Blogger Cash212 said...

I am a free-market Libertarian type and very much enjoy your blog and often share your posts with friends. However I am a bit confused as to why you choose to report good data while ignoring data that is more Bearish.

It almost seems like you are cherry picking the data. I actually don't recall any negative data points shared on the blog recently (and there has been much from labor participation to Empire Manufacturing, etc. off the top of my head). Furthermore, you ignore blatant fraud in the financial system (in the mortgage origination and securitization and real estate foreclosure process, for instance) which undermines the essence of contracts and the rule of law that is the basis for the free-enterprise system. It strikes me as intellectually dishonest unless the intent of this blog is to convey unbalanced optimism.

 
At 12/03/2010 2:09 PM, Blogger Mark J. Perry said...

Cash212:

I'm reporting here on what I call a "disappointing" jobs report, and I'm predicting a stubborn "jobless recovery" through 2012. That seems pretty bearish.

Plus, I often figure people can get all of the negative news they want by reading the MSM, and many come to CD for a more upbeat view of the positive stories about the economy - which are always there.

Remember that the media is naturally slanted towards bad news - that's what sells and makes "news." For example, in 2005 and 2006 when NOT A SINGLE U.S. bank failed for two years, out of more than 8,000 total banks, that went unreported because it wasn't considered "newsworthy" that 100% of the banks stayed in business. But as soon as a single bank fails, that automatically becomes makes "news."

I work completely independently without staff, support, or help, so there is a limited amount of time available each day, and I usually concentrate on the more positive, upbeat stories - and that by itself is a full-time job that keeps me busy 7-days per week, 365 days per year. The 4,000-5,000 people per day who visit CD seem to appreciate that approach.

Readers of CD get plenty of counter-balance from regulars like Morganovich and Juandos, who frequently provide bearish commentary to contrast my bullishness. I think they can confirm that they have never been censored for presenting opposing views.

 
At 12/03/2010 2:26 PM, Blogger Cash212 said...

"Remember that the media is naturally slanted towards bad news"

Apparently you don't watch CNBC. Also, publications tend to spin things bullishly and bearishly depending on who such news would favor. I like a free mkt/positive biased approach, but still a slightly more objective version of Carpe Diem then we currently get...but I will continue to read regardless and appreciate many aspects of your blogging. Thx.

 
At 12/03/2010 2:53 PM, Blogger Junkyard_hawg1985 said...

I was expecting a much better report than this. There have been multiple signs that things have been improving lately. The total number of Americans employed last month actually fell. In fact, the total number of Americans working today (138.888 million) is down from the April 2010 localized peak (139.455 million) by over 500K. For an economy that has been growing for the past 7 months, this is a terrible sign. If the European sovereign debt crisis intensifies, we could easily drop below the December 2009 employment trough (137.792 million).

 
At 12/03/2010 4:54 PM, Blogger Dr. T said...

It's hard to upbeat when the official statistics show 9.8% unemployment. The National Debt Clock web site indicates that the true unemployment rate is 15.6%. (The official unemployment statistics for the USA are highly biased since they include only those unemployed who are collecting unemployment insurance. Those whose benefits expired or those who stopped looking for work are dropped from the official stats.)

President Obama and Congress have created a climate that is bad for businesses. Businesses are reluctant to hire new employees (hence the rise in overtime hours) because the future costs of new hires are uncertain due to current and proposed anti-business regulations, federal meddling with health care insurance, and possible changes to corporate taxes. A gridlocked Congress next year may convince some executives that things won't get much worse, but Obama and the Democrat-dominated Congress have caused much harm in less than two years.

 
At 12/03/2010 9:35 PM, Blogger Bill said...

Dr. Perry,

I appreciate this blog and its attempt to find something positive in the negative. There are plenty of blogs and media that highlight the negative in economic reports.

 

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