For the third time in as many years, jobs growth over winter 2012 once again shows signs of a major relapse this spring and summer. The Labor Department’s employment numbers released on April 6 indicate a mere 120,000 new jobs were created in March, a number not even sufficient to absorb new entrants into the labor force for the month. This follows reports of more than 200,000 jobs created monthly since December 2011.
If this latest, third major reversal in jobs creation were a one-time occurrence, it could be attributed, perhaps, to a simple shift in real economic conditions. But three years in a row every spring? That repetition means there is likely something more fundamental at work.
While it is reasonable to expect some degree of divergence between the raw, statistically unadjusted jobs data versus the statistically adjusted data – the latter are smoothed out based on assumptions of seasonality, new businesses formed and other manipulations of the raw, actual jobs data – the mismatch between the actual jobs numbers and the statistically adjusted numbers this past winter nevertheless revealed a massive, extraordinary gap between the two.
For example, this past winter, the gap between the decline in raw, actual (statistically unadjusted) jobs and the statistically adjusted jobs numbers between November-December 2011 showed a net swing – or difference between the adjusted and unadjusted numbers – of about 430,000 jobs. That was not unreasonable, but between December 2011 and January 2012, the Department of Labor reported a statistically adjusted gain of 243,000 jobs in January 2012, whereas the raw actual jobs numbers showed an actual loss of 2.7 million jobs. That net swing of nearly 3 million jobs, more than seven times greater than the gap from the preceding November to December period, is unprecedented. That kind of massive gap between declining actual job creation and statistically adjusted reported job increases requires an explanation. However, the media seemed to simply accept without question that 243,000 jobs were created in January.
Another corroborating example is what happened to the U-6 unemployment rate over winter 2011/2012: the November to December 2011 U-6 jobless rate showed a gap between raw data and adjusted data of only 112,000 jobs. That was reasonable, but in December-January, the gap between the actual jobless numbers and the statistically adjusted numbers ballooned tenfold, with a difference between the two measurements of more than 1 million jobs
Something is going on, in other words, with the statistical adjustment methodology employed by the Department of Labor to estimate jobs in the winter months and in the first quarter of each year. The jobs-creation numbers reported by the Department of Labor between each winter the past three years are grossly overstated. That overstatement thereafter appears to end come late spring/summer, and the jobs numbers, even the statistically adjusted numbers, collapse in turn. This has now happened three years in a row. That means the gains of the past winter will likely again, for a third, time fade during the summer and the third quarter of this year.
In this writer’s 2010 and 2011 articles identifying this trend, it was suggested that at least two of the Department of Labor’s statistical operations – the winter seasonality adjustments and the department’s additional, and grossly inaccurate, assumptions, as well as its methodology for estimating “new business formation” (which raises the estimate of jobs created from newly launched businesses) – are seriously deficient. Those methods and assumptions, in other words, may be based on conditions that pre-dated the current recession’s unique, qualitatively different and more severe conditions. These out-of-date methodologies may well be resulting in gross overestimation of adjusted job creation at certain times of the year (specifically, the fourth and first quarters) and perhaps even underestimation at other times (that is, the second and third quarters). If so, what appears as volatility – gains in the winter and job losses in the summer – may obscure what is essentially stagnant job growth throughout the year during the past three years.
It is also possible that the apparent volatility in job creation may not be due solely to statistical adjustments. It may also be a function of businesses hiring cautiously at the start of their fiscal years and refraining from hiring further as the year progresses as it again becomes clear that consumers do not have the income to sustain their consumption. Household real income growth for the bottom 80 percent of the population, or about 100 million households, has declined steadily since 2009 and has been negatively impacted every spring by speculation-driven oil price hikes for the past three years. So, too, has spending by the wealthiest 10 percent households, whose buying is largely driven by the stock market. Stocks the last three years have surged in the fall-to-spring period, driven by free money pumped into the economy as a result of the Federal Reserve’s quantitative easing programs. Each year for the past three years, those programs run out by the spring, the stock market stalls and the wealthiest households pull back their spending, as well. Like jobs, general economic recovery has also entered a relapse in the summers/third quarters of 2010 and 2011. Thus, both the economy and jobs have been locked in a stop/go scenario since 2009.
What all that also means is – notwithstanding a winter economic and jobs resurgence each of the past three years – there really isn’t, nor has there ever been, any sustainable job creation of any consequence for the past three years. Jobs aren’t declining in great numbers, nor are they growing. We are “bouncing along the bottom,” as the idiom would have it, both in terms of jobs and the economic recovery in general.
The Obama administration’s three economic recovery programs, introduced in early 2009, late 2010 and now in 2011-12, have not fundamentally resolved the jobs crisis, nor have they been able to get the economy on a sustained growth path.
This fundamental stagnation in the jobs markets and the general economy’s trajectory of short, shallow recoveries followed by brief, so-called “relapses” is all the more amazing given that, since 2009, more than $1.5 trillion in tax cuts have been introduced by the Obama administration over the course of its three economic recovery programs, and that more than $1.5 trillion in spending (mostly subsidies to the states, the unemployed and long-term infrastructure projects that haven’t gotten off the ground) has also entered the economy. In addition, the Federal Reserve pumped more than $9 trillion into the banks and the stock and bond markets.
This more than $12 trillion in total fiscal-monetary stimulus has resulted in large corporations accumulating a reported cash hoard of more than $2.5 trillion. They have committed little of that to investment and job creation in the United States. When it comes to the relationship between investment and job creation, what was once termed trickle-down has become a drip. More and more subsidies to corporate America (banks and non-banks) are producing fewer and fewer results in terms of US-based investment and job creation. Some job creation is occurring, but when that minimal job creation is contrasted to the massive, $12 trillion in stimulus of the past three years, it becomes clear that economic recovery programs and related fiscal-monetary policies are, today, essentially broken.
To the extent jobs are being created at all, they are heavily skewed toward lower-paying temporary, part-time and two-tier wage jobs. Both Obama and corporations are making a big deal about jobs being brought back to the United States by the big multinational corporations such as General Electric (GE) and General Motors (GM), but the relatively small flow of such jobs are at half-pay and often do not include benefits. Check out GE’s vaunted job creation at its Kentucky plant and GM’s alleged new jobs in Detroit. New hires at both are paid $14 an hour, about half that of other workers, with worse, if any, benefits.
How many jobs, in recent years, have really been created in the manufacturing sector in general, and in automobile manufacturing in particular? When the recession started in December 2007, there were 13.9 million jobs in manufacturing in the United States and 978,000 jobs in the automobile industry, according to the Department of Labor’s B-1 Table of Employment. In July 2009, at the official end of the recession, there were 11.9 million manufacturing jobs and 640,000 auto jobs. This past March 1, more than four years after the start of the recession and approaching three years since it was officially declared “ended,” there are 11.7 manufacturing jobs, 751,000 of which are jobs in the auto industry. In other words, more than a quarter million auto jobs were lost since the recession started, and less than half – 110,000 – have been recovered (paying half, pay remember!). Plus, more than 2 million manufacturing jobs were lost since the start of the recession, and the number of manufacturing jobs is still less by 100,000 today than when the recession officially ended three years ago.
To conclude, after three years and three false job recoveries, the outlook for sustained jobs growth today is once again declining. The fiscal-monetary policies of the past three years have not resurrected the jobs market in any sustained way, any more than they have succeeded in restoring the housing market, or helping homeowners in foreclosure, or stabilizing state and local governments’ finances.
Since 1947, an economy has never recovered post-recession without a sustained job recovery, without the housing sector leading the recovery, and without state and local government increasing spending on jobs and services.
So long as current economic recovery policies focus on more tax cuts for businesses and investors, on more subsidies for corporations, more free trade, more deregulation and more deficit cutting for the rest of us – there will be no sustained recovery. It will at best result in a continuation of the stop/go economy of the past three years which is the defining characteristic of today’s ongoing, epic recession.