U.S. and Canadian Labor Markets in November

December 3, 2010

The U.S. Department of Labor monthly jobs report threw cold water on market optimism that had been building for more than a month.  Whisper numbers were looking for jobs to climb by 200K or more.  Instead, such rose 39K and included the smallest advance in private sector workers in ten months.  For the first time since March, the level of jobs was lower than six months earlier, and the 9K per month decline over those six months compares to a recent 150K per month peak over the six months to May.  The level of non-farm payroll jobs in November, 130.539 million, was almost identical to the 130.532 million level in December 1999.  Had the trend between end-1979 and end-1999 been sustained, jobs would now total 159.257 million, suggesting a current employment deficit of slightly over 28.7 million workers.  That’s almost four times greater than the widely quoted gap of 7.4 million workers, derived by subtracting present employment from the level in December 2007 when the last recession began.  The 7.4 million is a misconceived comparison because jobs growth already had underperformed the long-term trend for eight years when the recession began and because the trendline for the old normal is upward sloping, not flat. 

The expression “new new” is a vastly overused cliche among financial market analysts but one that truly fits in the case of the U.S. labor market market.  As the phrase implies, what used to pass for a normal or typically healthy labor market  is extremely unlikely to be regained, not in three years or five years, not in ten years, maybe not ever.  The deficit is simply too wide a gap to close, and even 28.7 million people understates it, since that number counts only people who are working.  While the unemployment rate is 9.8%, the broadest measure of people listed officially as either unemployed or unable to find full-time work stands at 17.2%, and even that figure fails to capture older workers coming to terms with an earlier retirement than they wanted or need.

Canadian labor statistics were also disappointing.  In Canada’s case, this was the third poor month in a row.  While the level of jobs were still 1.9% greater than a year earlier compared to a 0.6% on-year increase in U.S. jobs, employment in Canada rose merely 0.3% at an annualized rate between August and November.  In the latest reported month, private-sector employees fell by 11.5K.  What seems to be a silver lining in the Canadian labor market statistics, a 0.3 percentage point decline of unemployment to a 22-month low of 7.6% is not as good as it appears because the drop reflects the lowest labor force participation rate among young workers in 135 months.

In the days ahead, the following positive spin will be put on these unexpectedly weak labor market statistics.  They are just one dimension of the economy, while others including personal consumption and real GDP suggest a sounder recovery.  The financial community tends to be obsessed with real GDP and profits and so is likely to embrace this upbeat message.  In the 21st century, however, many recognize that GDP is defined too narrowly to serve as the last word.  The concept of triple bottom line will gain acceptance, and organizational success will be thought of in broader terms capturing the impact on people, planet and global profit.  In light of the structural nature of the jobs deficit in the U.S. and many other advanced economies and the lengthening average duration of job loss, the notion of a jobless economic recovery looks pretty oxymoronic, if not plain moronic.

Copyright 2010 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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