January’s 36,000 New Jobs Figure Casts Doubts on US Economic Recovery
January’s 36,000 New Jobs Figure Casts Doubts on US Economic Recovery
February 11, 20116:51 PM MST
Current job losses (light blue) in US is worst since WW2, and these losses look very long-term.
http://www.stateofworkingamerica.org/charts/view/4
Last Friday’s disappointing jobs report raised doubts about the overall health of the U.S.economy. According to The Bureau of Labor Statistics, only a sparse 36,000 jobs were generated in January, 2011. And the BLS revised the number of jobs lost since the recession began in Dec. 2007 upwards, from 8.31 million jobs to 8.74 million jobs.
All last month there were growing indications that the January jobs numbers would be weak. Weekly unemployment claims in January were as high as 450,000. The Gallup organization’s bi- weekly employment poll reported that the U.S.unemployment rate had been gradually increasing over the last few months, from 8.8% in November 2010, to 9.6% in December and 9.8% in January. There are almost 5 unemployed workers per job opening. In 2007, that ratio was 1.7 per job opening.
The BLS report had more bad news. Real unemployment, the U-6 figure that includes those who have given up looking for work and the underemployed, reveals an unemployment rate or 16%- 17%, not the 9%-10% BLS number the media usually report. Gallup says this U-6 number is actually in the 19%-20% range.
The NY Times and the Wall Street Journal, and pundits such as CNBC/WABC’s Larry Kudlow, initially blamed January’s severe snow conditions for the poor job numbers. However, as critics pointed out,Canada, where the winters are as bad as or worse than those the USexperiences, added 69,200 jobs in January 2011, equivalent to 600,000 jobs created in the U.S.By Saturday the Journal was backtracking somewhat on making the link between weather and jobs figures in its article “Storms Effect on Hiring is Tough to Measure.”
Many analysts are scratching their heads over why companies are hesitant to hire. After all, corporate profits are reasonably robust, and many American companies are flush with cash! At the end of the third quarter, cash held by 419 nonfinancial companies in the Standard & Poor's 500 list was up 49% from three years ago. At a speech to the U.S. Chamber of Commerce on Monday, even President Obama expressed bewilderment at the seeming reluctance of companies to spend their “trillions” on hiring new workers.
The truth is that businesses are in fact investing much of that excess cash in plants, equipment, and in many cases new employees. However, according to a Wall Street Journal study on the global economy, much of this new investment is headed overseas, to the faster-growing economies of Africa, Asia, and Latin America, not the stagnant US.
Corning Inc, maker of specialty glass and ceramics is investing $300 million to expand its research and development center in Corning, N.Y., adding about 100 researchers and Ph.Ds. However, it will spend 3 times that amount to build factories in China and Taiwan. Engine maker Cummins Inc., plans to add about 2,500 U.S.engineering and technical jobs in 2011. But it is also building plants in India and China for huge engines used in mining equipment and oil rigs. A good portion of Royal Caribbean Cruises Ltd. investments will go to ships in Europe and Asia.
3M told the Journal that it is expanding capacity in China, India, Singapore, Brazil and other rapid-growth foreign markets. General Electric is boosting R&D spending to $5 billion in 2011, expanding research operations in Brazil, China and Michigan. Pro Logis plans to spend up to $1 billion this year on new warehouses in Europe and Asia, as well as in the U.S.
The report’s major conclusion could not be clearer: Companies with the greatest global reach, especially into emerging countries such as Brazil, China, and India, are the likely to spend on more workers. Those focusing their sales efforts in the U.S. are the least likely to hire.
A host of policy-related issues are discouraging companies from hiring here in the US. The onerous corporate tax policies, the expenses associated with the new Obamacare law, and the possibility of new taxes on carbon emissions are just a few. The U.S.regulatory process has been cited as a reason that companies in the medical device fields are adding jobs first in Europe or elsewhere outside the United States before hiring here. Venture capital funding is also directing new investment to overseas medical device companies.
Policymakers and media pundits cling to the notion that the millions of jobs lost in the U.S. over the last 2-3 years will somehow miraculously reappear. The truth is, until these jobs-killing policies and laws are drastically modified or eliminated completely, expect weak hiring and stagnant wages for those lucky enough to have full-time jobs. According to economist Brad Schiller, the US needs to create 250,000 jobs a month to get back to the 5% unemployment rate by 2018. Over the last few years we have only achieved such monthly numbers a few times.
New policies must be instituted that unleash the power of US businesses to create those quality, high-paying jobs that Americans want and deserve. We can start by slashing corporate taxes, and then eliminate the onerous regulations stifling American ingenuity and sending jobs overseas!
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