Posted by: Ed Tittel
job growth falters and revisions paint a gloomier picture than anticipated, more grim stats from the May 2012 unemployment situation
Gosh! I was out of the office all day Friday, and thus missed my chance to jump on the May 2012 Employment Situation summary report as soon as it issued forth from the US Bureau of Labor Statistics at 8:30 EDT that morning. Of course, by now everybody now knows those numbers were shockingly bad (only 69,000 jobs added in May 2012, less than half of the 150,000 that economists had forecast before the official report went public). And when combined with the current Euro zone crisis, this news caused markets to take a big tumble, and pretty much erased all the gains in some major indices for 2012 (the Dow is down 0.8 percent from the start of the year, and the S&P 500 is up a mere 1.6 percent, while the NASDAQ is up a healthier 5.4 percent, according to the Associated Press). Not only that but job growth numbers for March and April were also revised downward, at a more modest -12,000 for March, and a more substantial -38,000 for April (which was none too great to start with).
What’s going on, apparently, is that enough businesses are still sitting out on the sidelines waiting for more sustained and substantial signs of improvement, to pull the trigger on converting their increasing piles of cash into headcount. I view their concerns as driven by the fear that there’s not enough demand in the markets to soak up the extra costs of adding people to increase output and productivity. And, thanks to the current global financial situation (extremely slow growth in the US, recession in Europe, and a cooling-off for the hot economies in China, India, Brazil, and Russia, and so forth) there doesn’t appear to be any incentive for businesses to get off the fence and start risking their savings or cash reserves on prospects for rising demand for their goods, products, or services. All I can say is “Ouch!”
Economists are quick to observe that the current revised growth rates suffice only to absorb population growth (or, in job terms, match the number of new entrants to the work force with the number of new jobs being created). This tends to leave out of the work force the current difference between our prevailing unemployment rate of 8.2 percent and the “normal” or “healthy” unemployment rate that usually falls somewhere between 5 and 6 percent.
Thus, we’ve got somewhere between 2.2 and 3.2 percent of the workforce facing long-term unemployment. Given US unemployment between 13 and 16 million (depending on who’s counting, and how their counts are compiled) that translates into roughly 3.5 to 6.25 million Americans of working age facing indefinite suspensions to their working lives. Again: “Ouch!”
Economists are talking about remedies that Republicans and fiscal conservatives are sure to despise. For one thing, it’s thought that the Fed could create some more liquidity through another round of “quantitative easing” though it’s hard to believe that adding more cash to the economy will help much, or that keeping US Treasury rates at historic lows will help much, either (though appetite for our debt seems unabated despite our deficit spending, as one of the few truly “safe havens” for money still around). For another, the President and the Democrats are in favor of some public works spending to invest in our nation’s infrastructure, to repair our highway system, and add to our ability to grow in the future.
I say “Bring the public works!” Let’s put running high-quality fiber EVERYWHERE at the top of the list. The USA has fallen to fifteenth place in the list of the world’s top Internet economies — and we invented the protocols and technologies involved — so why not do what it takes to make us number one in that arena again? It will not only create unimaginable opportunities for future growth, it will also create LOTS more jobs in information technology, and help put many more Americans back to work in an area that’s near and dear to the hearts of those like me (and probably also you, dear Reader).