That jobs report

[This was my radio commentary for the January 7 show. Audio here.]

Friday morning brought the release of the employment stats (Employment Situation News Release) for December. It was a strong report, though not quite as strong as it looks on the surface. Many of the gains are likely to be reversed in January, but the trend of modest, steady improvement continues—and manufacturing had its best year since 1984.

Now some details, edited for radio. Employers added 200,000 jobs in December. Over a fifth of that gain, 42,000, came from couriers and messengers—meaning all those FedEx and UPS folks delivering holiday packages ordered from the likes of Amazon. Online retailers had a great December. Not so much for brick and mortar retailers, who’d apparently expected otherwise and hired ambitiously, adding another 28,000 to the headline figure. Given the ultimate disappointment of the holiday season, retail-store-wise, and the explicitly temporary nature of the courier jobs, these gains—which together accounted for over a third of the total—are likely to be reversed in January. What I’ve been calling the eat, drink, and get sick sector returned to its previous strength after slipping in November, as bars and restaurants and health care together added almost 50,000, a quarter of the total.

There are good jobs in health care (and also lots of not so good ones), but with an exception I’ll get to in a moment, the strongest sectors were either evanescent or low wage or both. This is hardly the bold acceleration that some insta-pundits were touting on Friday morning. Maybe they’re Democrats.

In the negative column: temp firms, where hiring is often a portent of strength to come, and government, which continues to shed workers, though now mostly at the local level (and there, mostly education—isn’t that nice?).

There was surprising strength in manufacturing, a sector where employment fell by a third between 2000 and 2010 and where the absolute number of workers employed is well below what it was in 1947, even though the labor force has tripled since then. For the year, the factory sector added almost 200,000 workers. That’s the best gain in percentage terms (using yearly averages) since 1984. More on the manufacturing revival in a minute or two.

The numbers I’ve been citing come from a survey of about 300,000 employers. There’s also a simultaneous survey of about 50,000 households. That household survey gave a less upbeat picture than its employer counterpart. It showed no change in the share of the population working. But it did show a decline in the unemployemnt rate, from 8.7% to 8.5%, the lowest level in almost three years. Hidden unemployment was also down, with the number working part time for economic reasons and those classed as not in the labor force but wanting a job both falling strongly. As a result, the broad U-6 unemployment rate, which includes them along with discouraged workers (those who’ve given up the job search as hopeless), fell 0.4 point to 15.2%, also its lowest level in almost three years.

But the unemployment rate, which is down from its recession peak of 10% in October 2009, has been flattered by what’s known in the trade as labor force withdrawal. That is, you’re not counted as unemployed if you’re not actively looking for work. Many of the unemployed have simply given up on finding work, and they’re not counted as unemployed. So even though the unemployment rate is down a point and a half from that 10% peak, the share of the adult population working for pay, the so-called employment/population ratio, is exactly the same now as it was at that peak. (See graphs appended below.) That is not what we’d see in a normal recovery. We’re still 6 million jobs below the pre-recession peak at the end of 2007. At the growth rate we’ve seen over the last six months, it would take almost four more years to recoup those losses—and that’s not allowing for population growth. We’re still in a very deep hole and emerging only very slowly.

manufacturing miracle

And now a few more words on the manufacturing revival. Friday’s Wall Street Journal had a piece (“In U.S., a Cheaper Labor Pool”) on how Caterpillar, which has been doing quite well lately, is threatening to close a plant in Canada and move operations to a low-wage site unless it gets big concessions from its union, the Canadian Auto Workers. That low-wage country its threatening to move to? The United States. The Journal also reports on other manufacturing firms moving south from Canada (but without crossing the Rio Grande): Siemens, Navistar, and Electrolux. The reason? American workers are very productive but they earn a lot less. Caterpillar claims that its workers in Illinois cost the firm less than half as much as their comrades in Ontario. Over the last decade, unit labor costs—wages and benefits paid per dollar of output—have fallen by 13% in the U.S. They rose by 2% in Germany, 15% in Korea, and 18% in Canada. When you factor in transportation and other costs, U.S. workers in some sectors are starting to become competitive with China, where wages have been rising sharply for years and workers have developed a habit of striking and ransacking the boss’s office. The trend towards bringing factory work back to the U.S. even has a name: onshoring. A revival of manufacturing would be good in many ways, but one based largely on low wages and high levels of exploitation is not something to cheer.

graphic supplement

Here are graphs showing the labor force participation rate (LFPR, the share of the adult population that’s either working or looking for work—the employed plus the unemployed), the employment/population ratio (the share of the adult population that’s working), and the unemployment rate (the share of the labor force—the employed plus the unemployed—that lacks a job and is actively looking for work) over time.

FIrst, note the long rise in the LFPR and EPR (much of it the entry of women into paid work), their peaks around 2000, and their decline since.

And here’s the unemployment rate and EPR since 2000. Note that the unemployment rate is down 1.5 points since 2009, but the EPR is basically flat. The unemployed have had a hard time finding work, and have been dropping out of the labor force in record numbers. That’s only recently showing signs of turning around.

15 Comments on “That jobs report

  1. Good summary. I’ll have my union class read it. Pretty soon, manufacturing wages will be at 1947 levels. Too bad strikes won’t be at that level too.

  2. The real hourly mfg wage is about what it was in 1970. The average service wage is 1-2% higher than the mfg wage – in the 1980s & 1990s it was about 10% lower.

  3. Thanks for posting this, sometimes like to read it after I hear it.

    And Michael, who knows, maybe things are going to start turning around?

  4. I read elsewhere that Caterpllar’s competitor, GE, is paying $12/hour to its production line workers in Indiana. Tough to compete with that.

    I know anecdotally that online retailers were very competitive over the holidays. Lands’ End, for example, was offering 40% off everything plus free shipping. Amazon had great deals on all sorts of items with manufacturers’ rebates and free shipping. Many more retailers offered free shipping this year than in previous years, in my recollection. I was wondering how they could offer this. Either the shippers are offering good terms to their high-volume customers or else the retailers have fine-tuned their logistical systems. Either way, it’s great for consumers and a real disincentive to visit the mall.

  5. Hey There Lbonews,
    Along the same lines,, Energy audits. The word ‘audit’ makes grown men quiver at the thought! What the heck are they?

  6. …U.S. workers in some sectors are starting to become competitive with China, where wages have been rising sharply for years and workers have developed a habit of striking and ransacking the boss’s office.

    BBC on Chinese labor:

    And here is the link to China Labor Bulletin

    Good interview with Ms Dean. Though I can’t figure out how “commons” can relate to urban issues in a meaningful way. Especially the excluded sectors, that more resemble the gleaners who came to the commons to reclaim the leftovers and who did not participate in commons management. Dumpster Divers as the vanguard?

    btw Agnes Varda’s Gleaners:


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  9. Very Illuminating from a propaganda point of view when we still have a net loss of over 1 million jobs. I suppose any straw will be grasped at. why should someone work and be taxed when we can get 2 years of unemployment and work under the table for shady contractors. Hey the underground economy is alive and well.

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