Tag: US economy

U.S. Employment Tapers Off – Another False Start?

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After three months of solid job growth, BLS released what seems to be a bad April Fool’s Day joke in the form of the March jobs report. After adding jobs at an average monthly rate of 246,000 for December 2011 – February 2012, total nonfarm payroll employment rose by only 120,000 in March.

In light of projections by analysts that job gains would exceed 200,000, this report begs the question, “Are we seeing another false start in job growth, as we did in the first half of 2010 and 2011, or was the March report just another bump in the seemingly endless road to full recovery?”

On Monday (April 9), the DJIA lost 130 points, or 1%. Is that a real answer to the question or just a partial answer?

On a positive note, jobs were added in the Leisure and Hospitality (39,000); Private Education and Health Care (37,000); Manufacturing (37,000); Professional and Business Services (31,000), and Financial Services (15,000) sectors.

Many of the jobs in the Manufacturing and PBS sectors are primary jobs, i.e. they bring outside wealth to the community and they create more support jobs than other sectors. It is good news when jobs are added in the Tourism sector because the industry touches most regions. Increased tourism jobs are an indicator that people have greater disposable income – and they are spending it.

Increased jobs in the Financial sector may be a sign that the woes of the industry may be behind us – with an emphasis on “may”. And then there is the Private Education and Health Care sector. Depending on our perspective this sector may be viewed as a perpetual job creation machine or nothing more than a bureaucracy builder.

The losers were Retail Trade (33,800) and Construction (7,500) sectors.

So is the latest report an April Fool’s Day joke? Employment growth is likely to continue, but not likely at the rate of 2250,000 jobs a month that is needed to significantly lower the unemployment rate.

 

©Copyright 2011 by CBER.

It is Time to Right the Ship – America’s Financial System

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Zbigniew Brzezinski, National Security Advisor to President Carter, recently released a book entitled Strategic Vision – America and the Crisis of Global Power.

In his book, Brzezinski lays out America’s assets and liabilities, listing six of each. On the liability side, he focuses extensively on the flawed financial system.

In a footnote on page 48, the author highlights data from Roger Lowenstein’s, The End of Wall Street (2010) explaining the social and economic consequences of the “self-induced 2008-2009 financial crisis (note the use of the phrase self-induced):
• Average deficits of G-20 nations increased from 1% to 8% (p. 294).
• By 2009, American share of the national debt was $24,000-$2,500 of which was debt to China (p. 294).
• America’s total national wealth decreased from $64 trillion to $51 trillion (p. 284).
• America’s unemployment rate reached 10.2% (p. 284).
• The United States lost 8 million jobs (p. 284.)
• Mortgage foreclosures increased from 74,000 a month in 2005 to 280,000 a month in the summer of 2008, and a high of 360,000 in July 2009 (p. 147 and p. 283.)
• Banks failed at a rate of three per week in 2009 (p. 282).
• During the spring of 2009, 15 million American families owed more on their mortgages than their homes were worth (p. 282).
• There was a total GDP contraction of 3.8% – the biggest contraction since post WWII demobilization (p. 282).
• America experienced its longest recession since the 1930s ( p. 282).
• Stocks fell 57%-the biggest drop since the Great Depression (p. 281).

These data quantify how tough the times have been for Americans. Brzezinski takes it a step further by pointing out that one of America’s greatest assets is its overall economic strength and the power associated with that position. In other words there is a lot of incentive for the U.S. to right the ship and fix the problems with its financial system – immediately.

For details, check out the book. It is a must read!

 

©Copyright 2011 by CBER.

The Mismatch of Skills between Company Needs and the Unemployed

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It is an understatement to say that there is a mismatch of skills between the unemployed and the needs of the companies looking for workers.

There are 2.1 million unemployed workers in occupations with unemployment rates below the natural rate (4.5% to 5.0%). Many of these occupations require a college degree. These occupations account for 31% of total U.S. workers.

There are 4.3 million unemployed workers in occupations with unemployment rates between the natural rate (4.5% to 5.0%) and below the U.S. average. These occupations account for 38% of total U.S. workers.

There are 6.0 million unemployed workers in occupations with unemployment rates above the U.S. average. These occupations account for 31% of total U.S. workers.


The bottom line is there are 10 million workers competing for replacement jobs in their occupations. As well, they are part of the pool who are competing for the handful of jobs in industries where they are not qualified.

It is clear why the unemployment rate has taken so long to return to the “natural rate” and it is easy to prepare the chart that illustrates the challenge.

What is the remedy?

 

©Copyright 2011 by CBER.

Where are all the Startups? – Jobs Created Have Increased at a Declining Rate Since 1999

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Startups, entrepreneurs, and small businesses have been the focal point of discussions about how the U.S. and Colorado will fully recover from the 2007 recession. As part of this dialogue, there is a wealth of information and misinformation about the importance of these businesses to the economy.

So what do the numbers say?

The first step in analyzing the growth of startups is to define them. The second step is to find a data set that tracks changes based on that definition.

There are many ways to define an entrepreneurial business venture or a startup company that include:
• No formal structure.
• Type – Sole proprietorships or LLCs.
• Funding – Microenterprises.
• Size – A company with 1-4 employees.
• Age – A company less than 1 year in age with employees.

For purposes of this discussion, startups will be defined as firms less than one-year in age that have employees. By definition, sole proprietorships, microenterprises, or LLCs may be included if they meet these criteria. The Bureau of Labor Statistics produces data about startups defined in this manner. BLS reports the number of firms and employees based on a year ending on March 31. For example, 1994 data includes startups for the period April 1993 through March 1994.

A review of the data shows the number of jobs created at startups has increased at a declining rate since 1999 for both Colorado and the U.S.

In 1999, 94,100 jobs were created at Colorado startups. That number decreased every year through 2010. That year the new group of startups created only 47,100 jobs. A slight increase was posted in 2011.

A similar pattern occurred at the national level. In 1999, 4,703,000 employees worked at U.S. companies started that year. By 2010, the number of employees working at companies that began operations that year had fallen to 2,457,000. A slight increase was recorded in 2011.

Colorado has a track record for having world renowned startups. Clearly good things have come from Colorado entrepreneurs and startup companies; however, by this definition, Colorado may not be the entrepreneurial Mecca that we are led to believe.

For additional information on startups and job creation go to https://cber.co/ or the report “Where Are All the Startups?”

©Copyright 2011 by CBER.

Conference Board Points to Slower Growth in 2012

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Over the past 18 months, The Conference Board  has provided a depressing, but accurate assessment (unfortunately) of the performance of the U.S. and global economies. Overall TCB points to slower growth in the world economy in 3.2% in 2012 vs. 3.6% in 2011.

TCB divides countries into two groups – advanced and emerging. The U.S., Japan, and the E.U. 15 are the major players in the advanced group. The emerging group includes China, India, the remaining Asian countries, Latin American, Middle East, Africa, Russia and other CIS countries, and Central and Eastern Europe. The advanced economies account for 50.3% of global output and the emerging economies are responsible for the remainder, 49.7%.

In 2012 the advanced regions are expected to expand by 1.1%, whereas the emerging countries, will post a much stronger gain, 5.1%. TCB feels that parts of Europe are in a recession. The depth of that recession is likely to be determined by the magnitude of their debt crisis.

Japan is the only region that is showing an increase in the rate of output for 2012. As they recover from the tsunami and power plant tragedy that occurred last year, they will experience minimal growth of 0.7% in 2012. In 2011, their output posted a change of -0.5%.

About 22% of U.S. exports go to Europe. As well, Europe provides about half of the income earned abroad for U.S. multinational companies. A decrease in European demand could lower the rate of U.S. GDP growth and the strength of our economy. On the other hand opportunity exists for American companies exporting goods and services to the emerging economies.

Despite this dismal outlook, the U.S. posted job gains of 200,000 in December 2011. Time will tell if this increase is an anomaly, based on TCB’s dismal outlook or if we will look back to December and see it as a turnaround point for sustained U.S. growth at a higher rate.

 

©Copyright 2011 by CBER.

U.S. Employment Situation Improves

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The Bureau of Labor Statistics recently announced that wage and salary payrolls added 200,000 workers in December. This means that about 133,000 net jobs were added on a monthly basis in 2011. There was marked improvement as the year progressed, as about 143,000 jobs were added a month for the last 6 months of the year. Sectors adding jobs were transportation and warehousing, retail trade, manufacturing, health care, and the extractive industries.

This rate of growth has been sufficient to gradually reduce the unemployment rate, which reached 8.5% in December. It is necessary to add about 225,000 jobs a month on a sustained basis to lower unemployment significantly.

There are about 13.1 million unemployed workers. Most likely that number understates the severity of the situation as it does not include discouraged workers or those who did not want to deal with the hassles of seeking unemployment.

It is important to note that 5.6 million have been without work for 27 months. (Keep in mind the total number of unemployed people in January of 2001 was 6.0 million people).

The jobless rates for men (8.0%) and women (7.9%) are similar, while teenagers come in at 23.1%. The Asian population has the lowest unemployment rate at 6.8%, followed closely by whites at 7.5%. Hispanics have a jobless rate of 11.0% and blacks register 15.8%.

The Q4 preliminary Real GDP report is scheduled to be released in the latter part of January and is expected to be in the 2.5% to 3.0% range, a marked increase from the first part of the year. The combination of improved output and the increase in the number of jobs added bodes well (but not great) for 2012.

 

©Copyright 2011 by CBER.

ISM Manufacturing Index Points to Continued Growth

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The Institute of Supply Management produces the Purchasing Managers Index (PMI), a measure of sentiment among manufacturing purchasing managers. The November PMI registered 52.7, an increase from 50.8 in October. November marks the 28th consecutive month of expansion for the PMI and the manufacturing sector.

Generally speaking, a reading above 50 indicates that the manufacturing economy is expanding while a reading below 50 points to a general contraction in manufacturing. A reading above 42.5 points to expansion in the overall economy. (November is the 30th month the PMI has been above 42.5).

Looking back over the past decade, manufacturing was hit hard during the 2001 recession and did not show sustained expansion until mid-2003. Sentiment remained strong for about a year then gradually tapered off with a severe decline in mid-2008. Despite 28 months of expansion, the PMI approached 50 in October.

Manufacturing is important because it is a source of primary jobs. In Colorado it is a particularly important part of the Boulder, Larimer, and Weld Counties. Each of the three areas has different manufacturing strengths.

©Copyright 2011 by CBER.

Chance of Recession Recedes – The Conference Board

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There are signs the economy is improving. The unemployment rate is trending downward, retail sales are trending upward, and manufacturing has added jobs in 2012. For the 220,000+ unemployed Coloradans and those who aren’t captured in the UI numbers, it feels like the Great Recession never ended.

In recent months, The Conference Board (TChad demonstrated an ability to more accurately assess the economy than other groups. As a result, people took notice when they pushed the odds of another downturn up to 52% in October. A short-term historical look at TCB’s chance of recession statistics follows:
• July   17%
• August   33%
• September  45%
• October  52%
• November 32%
• December     9%

It is good news that the November and December percentages dropped off significantly. If a recession had occurred, it would have been short and shallow – barring a major shock. The economy has performed at a subpar level for so long and the recovery has been so weak that there would be little room for further deterioration in the event of another downturn.

Within the past month there has been reason to be more upbeat. Patience will continue to be a virtue as Coloradans weather the recovery.

 

©Copyright 2011 by CBER.

Conference Board and Moody’s Foretell Weak Growth in 2012

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On Halloween, Moody’s released a frightfully optimistic forecast for 2012. It calls for no recession, Real GDP growth of 2.8%, an unemployment rate of 8.8% and the creation of 1.4 million jobs.

About 10 days later, The Conference Board (TCB countered with its latest take on where the U.S. economy is headed. In the spirit of the season, that update states that the economy is a real turkey.

TCB’s outlook follows:

Real GDP
2011  1.7%, up from 1.6% last month
2012 1.1%, down from 1.8% last month
2013 1.9%
TCB projects 0.7% growth in Q4 2011, while Moody’s foretells expansion in the range of 2.5%. TCB sees Q1 2012 growth of 0.5% followed by expansion of 1.2% in Q2 2012.

Consumer Spending
2011 2.1%, down from 2.2% last month
2012 1.9%, up from 1.5% last month
2013 1.6%
Consumers will remain cautious.

Capital Spending
2011 8.8%, up from 6.9% last month
2012 5.8%, up from 5.5% last month
2013 5.1%
The private sector will be less than robust in the months ahead.

Net Exports (billions)
2011-416.0, increased from -$398.3
2012 -430.8, increased from -$370.6
2013 -418.3.
There are many factors that could cause the trade deficit to increase such as higher prices for a barrel of oil and reduced demand for American goods and services in Europe.

Two things are certain. First, there is agreement that the outlook for 2012 is not robust! Second, “not robust” covers a wide range of economic conditions.

©Copyright 2011 by CBER.

Is a Recession on the Horizon?

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The Wall Street Journal recently reported that The Conference Board has put the chance of a recession at 45% within the next 12 months. This is higher than other polls, which are more in the neighborhood of 1-in-3. TCB Chief Economist Bart van Ark’s projection is up from 1-in-3 in August and 1-in-6 in July. The WSJ noted, “For the last 23 years, a downturn has followed every time The Conference Board’s estimate topped 40 %.”

This news is significant because for the past year The Conference Board has unfortunately has more accurately projected the performance of the U.S. economy than such groups as Kiplinger’s, Moody’s, and the National Association of Business Economists. In some cases, these groups provided projections that pointed to a recovery.

The Conference Board’s outlook for the remainder of 2011 and 2012 is:

Real GDP
2011 1.6%
2012 1.8%
A slight improvement is on tap for the second half of 2012.

Consumer Spending
2011 2.1%
2012 1.9%
The consumer will not jumpstart the economy

Capital Spending
2011 6.9%
2012 5.5%
The private sector will be less than robust over the next 18 months.

Net Exports (billions)
2011 -$398.3
2012 -$370.6
Slight improvement in the trade deficit.

This is not a pretty picture!

 

©Copyright 2011 by CBER.