Four Unfortunate Facts about the Job Market

Posted by: Michael Mandel on July 02

After this morning’s report, here are four unfortunate facts about the job market.

1) Manufacturing jobs are falling at their fastest rate since 1946, down -12.2% over the past year.

2) Private sector jobs outside of manufacturing are also falling at their fastest rate since 1946, down -4.0% over the past year.

3) Manufacturing jobs are falling much faster than the rest of the private sector. In fact, the ‘excess’ job decline in manufacturing (the difference between -12.2% and -4.0%) is the largest since 1975.

4) The ten-year job growth in the private sector is down to only 559K jobs. At this rate, we will hit zero ten-year private job growth next month or the month after.

One important question is whether there is a ‘floor’ for manufacturing jobs. So far, we haven’t seen one. Over the past three months, manufacturing jobs have been falling at a -13.6% annual rate.

I would say that the evisceration of U.S. manufacturing may be our single biggest nonfinancial problem right now. I’m currently examining the extent to which this can be tied to trade.

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Reader Comments

Stu

July 2, 2009 10:34 AM

The big question for me is, if the US economy becomes solely/primarily based on "services" (consumer) then how do we recover from the next recession with a very limited manufacturing (producer) base?

Karl

July 2, 2009 10:41 AM

There may not be a lot of "jobs" available, but there IS plenty of "work" out there in America for anyone who is willing to get a little dirty, or doesn't mind getting sweaty, & can climb a ladder, etc. All it takes is a simple flier & a cell phone, and ANYONE can do it! Don't rely on ANYONE else to "give" you a job anymore. Remember, houses will always need to be painted, gutters will always need to be cleaned, lawns will always need to be cut, driveways will always need to be patched, carpets will always need to be cleaned........... "The times, they are a changin'. - Dylan

Squeezebox

July 2, 2009 10:58 AM

This is especially worrisome because only about 1/3 of working adults have college degrees. What do we have to trade with the rest of the world? Where will we find jobs for all the people who either can't afford college or are simply too dumb?

Mahagwa

July 2, 2009 11:55 AM

Two things: (1). The notion of OUTSOURCING (NOT OFFSHORING necessarily, which is an off-shoot of outsourcing) was probably the dumbest idea in business philosophy. FOCUS ON YOUR CORE COMPETENCIES ...that has done a lot more harm than good. (2). Manufacturing is leaving the country for primarily 3 reasons: (a). Trade agreements -- which are not always favorably bilateral (i.e. US workers lose); (b). Cost incentives -- remember, at the end of the day the business is run for the owners, employees are simply an expense item on the income statement. That is why employee training does not make sense -- you develop an asset, not an expense..if employees were viewed for the value they add, and hence recognized as an asset on the balance sheet, reflective of the book value of a company, then things might change. That said, if I can source product from China at 10% of what it would cost to produce same product in the US, and yet sell for the same price, then my profit margin goes up by 90%...when executive compensation is tied to stock price (in terms of vested options), then it makes sense to move manufacturing off-shore (from the executive's perspective) -- there really is no incentive to implement production innovations that will bring costs down in the long run (3) The american consumer loves to spend, and the american economy is too reliant on consumer spending...consumers want low cost products, hence the move to off-shore manufacturing. If I am a widget maker based in Scranton, PA and it costs me $1 to make a widget, and I sell it for $1.50 (50% profit) then I can not compete with a widget maker incorporated in New York, NY who imports his widgets from China -- where they cost $.20 to make .. he can sell his widgets for $.60 and make a 300% profit (maybe 200% if you factor in shipping and processing)..who will have a greater market share?

Anonymous Coward

July 2, 2009 12:24 PM

The real issue here is whether automated manufacturing is replacing these jobs, or whether the manufacturing is leaving the country. If we're exporting money, it leaves the country. If we're making the things here, then we need people to learn machining, learn robotics, learn programming. We need those college graduates, and other jobs will appear. They just won't be the machinable jobs.

Friarspoint

July 2, 2009 12:24 PM

It's not that complicated.

Everybody's been buying a lot more stuff than they need, living in bigger houses, driving bigger cars.

Now we have about 10% fewer jobs.

So, let's all work 10% less, and cut expenses by 10%

And just be happy. If you think you need all that extra stuff, think a little longer.

Stu

July 2, 2009 12:58 PM

Mahagwa,

Excellent point... Now this is also happening not only in manufacturing but in software. You can hire an English fluent programmer in India for 1/5 - 1/10th the cost of a similar programmer in the US. With the internet, there is virtually no cost in "shipping". I could hire 5-10 programmers in India and accelerate or expand my product line rapidly. This would make me more competitive.

Microsoft is already saying that Obama's plans will increase and not decrease their offshore software development. So this is going to devastate the "college degree" groups too. Not just in the software industry, but nearly any job that is dependent upon a computer.

Kartik

July 2, 2009 03:01 PM

I am not sure that chasing manufacturing jobs is the most worthwhile goal.

The US has lost millions of manufacturing jobs, but the number of such jobs in China is falling too. Technology and automation is the biggest job killer in manufacturing, not trade.

Mahagwa

July 2, 2009 03:10 PM

America was built off innovation..along with the fact that both world wars did not touch american soil, hence no local infrastructure destruction. Along with that, America financed most of the recovery from the 2nd world war, and given that europe was destroyed, america had an advantage which lasted about 10 - 15 years.
Here is the deal... we need to make education attractive again. As a black man, it appalls me that the drop-out rate amongst black kids is above 30% (and i'm talking about high school)..most of these kids want to be rappers (which is an industry in decline) or some other non-educated stuff.
I was a collegiate athlete (football and soccer) at one of the top colleges in the country. i was on athletic scholarship. whilst many of my fellow athletes took the education for granted, i did not. even though i was a star player, i knew their existed the possibility of not going pro, and hence sought an education as well (hell, it was free).
We need to promote education, we need to have a population that is at least 50% college educated.
Once we have the brains, we need to innovate and find ways we can create high value jobs and industries that can not be easily replicated by other countries, or exported.
Some specific areas would be: Nanotechnology (the potentials are limitless, we have the best universities, and we have the infrastructure); others would be health technology (such as medical devices, medications, etc); someone mentioned automated manufacturing..that might be a way to eliminate the cost advantages that China and others have (in terms of cheap labor)...bottom line, we need to face reality..this is a global economy, how do we differentiate ourselves and restore our greatness??
But to do this, we need LEADERS, true leaders who are forward looking and have a pioneering spirit. True leaders who are concerned about the sustainability of what they deploy as opposed to quick and temporary profits. We need strategic thinkers at the top, who can envision a bright future and sell that vision to the masses. Aparently, we lack that in the world of business and politics. I think it is time I ran for the US Senate...

Doug

July 2, 2009 03:16 PM

We need to make products (aside from toxic financial instruments) which we can export.

Mowing your neighbor's lawn or cleaning his gutter will not get us out of economic mess, and especially will not help our trade deficit or strengthen the dollar.

Doug

July 2, 2009 03:22 PM


http://money.cnn.com/news/newsfeeds/articles/djf500/200906261330DOWJONESDJONLINE000666_FORTUNE5.htm

"General Electric Co. (GE) Chairman and Chief Executive Jeff Immelt on Friday called for the U.S. to set a target for manufacturing to account for 20% of total employment as part of a "dramatic industrial renewal" of America.

Immelt also said the U.S. should reinvigorate efforts to improve its competitiveness as an exporter, boosting investment in research and development, education and training."

gabe, san diego

July 2, 2009 04:27 PM

Welcome to the effects of Globalisation!

Doug

July 2, 2009 04:27 PM

The amount of our imports (both manufactured goods and non-manufactured goods such as raw materials) has been skyrocketing the past couple of decades. Given the large increase in imported manufactured goods, offshoring is to blame for a large loss in manufacturing jobs (as well as automation). Take a look at the products which you buy at Wal-Mart -- how many of them are manufactured in the U.S.?

Walter Nodelman

July 2, 2009 05:22 PM

See LINK to Information Technology Business Edge Magazine.

HOPE for solution of our national economic problem is in the READER’S COMMENT which follows. . .

http://www.itbusinessedge.com/cm/blogs/all/no-easy-answers-on-offshoring/?cs=30511

BIGWEEDS

July 2, 2009 05:39 PM

Folks,
I wish that the people that do all those important and (accurate ???)calculations about anything that you can think of would stop multiplying their numbers to give us a "yearly" rate.
If there is a decrease of 1% for the month, I do not need or want to know what it would be if the decrease lasted another 11 months. I believe that many of these people love to make the outcome as dire as they can. STOP IT!! (please!!)
Regards

Flarben Zackberger McGoo

July 2, 2009 05:44 PM

The poster that said there will always be jobs for people who are willing to get a "little dirty" is just wrong. Manufacturing and construction have been decimated in this particular downturn, and this morning's report points out that unemployment among men is now 10% (before taking into account underemployed and discouraged workers) and among construction workers, it's 18%. Lots of people are willing to get dirty and work hard, but our manufacturing job base has been absolutely decimated as the article points out. We've sold out our workers so that foreign governments will keep funding our government's profligate, unending spending. This is the high cost of low prices!

Tax cuts will never grow us out of the problem, but tax SIMPLIFICATION and dramatic entitlement cutbacks might. We're almost at the point where it's too late, though. Watch the documentary "IOUSA."

With lawyers, accountants, bankers and pointy-headed pseudointellectuals in charge, what we will get is more of the same -- layer after layer of confusing regulations and federal/state bureaucratic interplay that waste time, resources and creative energy. And we'll also get endless bailouts that benefit corporate cronies and a host of new entitlements that we can't afford. I guess you can tell I'm not optimistic and I have no confidence in either party to step up and truly address our problems.

JohnR

July 2, 2009 07:37 PM

If there's anything markets hate it's uncertainty and excessive risk. And that's precisely what we have right now:

1. Potential costs of Cap & Trade
2. Potential costs of health care reform
3. Uncertainty about Obama's tax schemes; business tax, capital gains, etc.
4. An endless array of ambitious Obama "programs".
5. Obama's plan to triple the national debt in 10 yrs

With all this uncertainty and risk, why would any business expand at this time? I've got my life savings in CDs; no way I'm getting into stocks with all this weird "change". Too scary.

Dan

July 2, 2009 10:36 PM

The US lost 1/3 of its manufacturing jobs during the Bush years (an average of about -750Kjobs/yr); that was during "good" times. So now that we have "bad" times, why expect the trend to change? Now, shall we get into the carnage in consturction? Homebuilding, which always gets hit 1st is down from ~200K bldg permits in '06 to less that 50K now. Commercial construction will hit the wall presently, as jobs are built out. What's going to turn it around I'd like to know? Putting the stimulus money going into unemployment insurance and shoring up social programs isn't going to create new jobs. These economists who are predicting a turnaround are totally incompetent. There's not going to be a turnaround until we start making things in this country, again.

cm

July 2, 2009 10:45 PM

Karl: When there is a reference to "jobs" in common parlance, it usually means "official" jobs paid at a level that covers the cost of running a profitable legal business conforming to environmental and workplace safety regulations, associated taxes, and puts bread on the table for the worker.

Under the table labor that evades those customary cost structures does not constitute "jobs" in that sense. According to what I'm hearing, many people cannot afford (or won't spring for) "fully loaded" service charges.

Roger T

July 2, 2009 10:46 PM

This is all good news. Most Americans don't have a backbone, as they're all just looking for free health insurance and any other freebie they can get their hands on. In short, Americans don't deserve the amenities they think they're entitled to. As CA goes down the gutter, America will likely follow, with everyone pointing their finger at everyone else.

cm

July 2, 2009 10:50 PM

Stu: "You can hire an English fluent programmer in India for 1/5 - 1/10th the cost of a similar programmer in the US. ... I could hire 5-10 programmers in India and accelerate or expand my product line rapidly."

What is that product line of yours that you are talking about? I know of a few "product lines" where the above is not the case.

cm

July 3, 2009 01:58 AM

Roger T: I can assure you that "finger pointing" is not a US invention, it happens everywhere. As for the other stuff, there are certain conventions, customs, and standards in any and every society. "Affordable" or otherwise "accessible" health care is the hallmark of most modern societies (first world throughout a good part of the so called "third" world). As we speak some "third world" countries have (basic) health care accessibility for their populations that rivals or exceeds that of the US.

Mike Reardon

July 3, 2009 04:00 AM

Japanese GDP fell by 14.2% in the first quarter of this year, that combined with the 2008 forth quarter 13.5% loss, is of course a substantial pullback of Japan’s demand for imports from all world markets. Similar pullbacks have all Western Nations GDP shrinking, all but the few developing nations in Asia have no growth but only contracting economies.


We get the line, that the banks who still are so tight on lending are stopping almost all business. Well in fact only 20% of business lending is from banks. The other lending 80%, are not lending thru business commercial paper, they are only now being drawn into minor investments in equities, the rest is still firmly in Federal Reserve Bank bonds. It’s a world wide crash in the industrial production because of lack of demand and lack of liquidity.

John D. Froelich

July 3, 2009 09:50 AM

Manufacturing is on the same path that agriculture took from over 90% of jobs ast the Revolution, down to about 1% today. US Manufacturing grew about 270 percent from 1980 to 2007, while reducing the number employed by 60%. It is the wrong place to look for increasing jobs in the future.

JJ Jones

July 3, 2009 10:12 AM

It's simple. When Obma, Nancy and Harry spend every waking moment of their lives coming up with new ways to tax and regulate, jobs will keep going away.

Cut taxes, cut regulation and for the love of god stop this insane cap and trade idea. The jobs will follow.

Joe Cushing

July 3, 2009 11:13 PM

How much of this manufacturing loss is due to the auto industry? Much of that will come back as soon as thing turn around--even if it is in Hebron KY instead of Detroit. People are going to buy cars.

Steve

July 6, 2009 03:09 PM

Do not expect manufacturing jobs to flourish when the White House pursues policies likely to lead to the following;

1. Higher energy costs
2. Higher labor costs
3. Higher taxation
4. Increased indebtedness

Thank you for your interest. This blog is no longer active.

 

About

Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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