Last Friday's jobs report from the the Bureau of Labor Statistics was deeply disappointing. It goes without saying that approximately 1,029 out of 1,029 economists got it wrong. The Labor Department reported that the economy added only 54,000 non-farm payroll (NFP) jobs, whereas those happy-go-lucky economists were expecting 190,000.
The result seemed to confirm the trend we've seen in new jobless claims lately.
Graph from Tim Iacono. Claims fell below the magic 400,000 mark for a brief time, but have now been over that level for 8 consecutive weeks.
But notice the great volatility in the number of claims made from week-to-week. Perhaps the apparent noise in the data is telling us something important, something GOOD!
In an essay called Why The Rich Love High Unemployment, Mark Provost focuses on labor market flexibility, which Investopedia defines as—
Firms' ability to make changes to their workforce in terms of the number of employees they hire and the number of hours worked by the employees. Labor market flexibility also includes areas such as wages and unions.
A flexible labor market is one where firms are under fewer regulations regarding the labor force and can therefore set wages (i.e. no minimum wage), fire employees at will and change their work hours. A labor market with low flexibility is bound by rules and regulations such as minimum wage restrictions and requirements from trade unions.
Perhaps all that churn in new hirings and new firings represents greater labor market flexibility, and thus greater competitiveness in America's job market. Businesses are hiring when things go well for a few months, but firing when times get tough again. Provost explains that hiring and firing in the United States is easy to do—
Proponents of labor-market flexibility argue that it's easier for the private sector to create jobs when the transactional costs associated with hiring and firing are reduced. Perhaps fortunately, legal protections for American workers cannot get any lower: US labor laws make it the easiest place in the world to fire or replace employees, according to the OECD.
Another consequence of labor-market flexibility has been the shift from full-time jobs to temporary positions. In 2010, 26 percent of all news jobs were temporary — compared with less than 11 percent in the early 1990's recovery and just 7.1 percent in the early 2000's.
Provost then quotes Obama Car Czar Steven Rattner, who argued in the Washington Post (January 31) that labor market efficiency is the road to America's salvation. We must highlight the whole quote so Rattner's thoughts really sink in.
Perversely, the nagging high jobless rate reflects two of the most promising attributes of the American economy: its flexibility and its productivity. Eliminating jobs—with all the wrenching human costs—raises productivity and, thereby, competitiveness.
Unusually, US productivity grew right through the recession; normally, companies can't reduce costs fast enough to keep productivity from falling.
That kind of efficiency is perhaps our most precious economic asset. However tempting it may be, we need to resist tinkering with the labor market. Policy proposals aimed too directly at raising employment may well collaterally end up dragging on productivity.
Efficiency is our most precious economic asset. And clearly, worker productivity—squeezing more production out of workers without concomitant increases in pay—is right up there with flexibility in increasing our efficiency, as I explained in Gotta Love That Worker Productivity!
If you are among the approximately 20% of Americans who are unemployed, or working part-time while desiring full-time work, perhaps you feel bitter, depressed and disenfranchised. Perhaps you feel that economic policy-makers have let you down. Perhaps you have a Bad Attitude.
But cheer up! You are part of the solution, not part of the problem. Don't think of yourself as underemployed and useless, don't think of yourself as a couch potato watching re-runs of The Simpsons. Instead, think of yourself as flexible. You will do anything on God's Green Earth for a job are available for work at anytime, at any wage, and will work as few or as many hours as your corporate master generous employer wants you to work.
So get rid of that Bad Attitude. Think of your potential productivity and flexibility. And should you get a job, and be called upon to make some sacrifices along the way to increase America's competitiveness, always remember the encouraging message the Nazis put on the front gate of Auschwitz—Arbeit Macht Frei.
"Eliminating jobs—with all the wrenching human costs—raises productivity and, thereby, competitiveness."
The last 40 years summed up so effortlessly. It is to laugh, darkly.
Posted by: rumor | 06/06/2011 at 12:09 PM