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Jobs report: Why there isn't more hiring

A man looks at employment notices on the wall at the New York State Department of Labor employment center in the Brooklyn borough of New York City.

TEXT OF STORY

Kai Ryssdal: The math goes a little something like this: 431,000 jobs were added to the economy last month. You take away almost all of 'em -- temps for the 2010 Census -- and what you have is a dispiriting 41,000 net new places to work for the month of May. We're going to take today's report apart with Marketplace's Mitchell Hartman. Hello, Mitchell.

Mitchell Hartman: Hello, Kai.

Ryssdal: So let's get straight to the jobs that count on this report, which would be the permanent, private-sector jobs, right?

Hartman: Right. I was getting these exciting e-mails predicting anything from 170,000 to nearly double that. And that's in addition to the census temps. Well, the census numbers were right. But all the other employers out there, they just sort of didn't show up to the party in May. I mean, the best number in there was 29,000 jobs added in manufacturing. Thirty-seven thousand were added in services, but actually most of those were temps.

Ryssdal: Yeah, which -- as we said -- doesn't really help. OK. So let me ask you this then: Does it mean job creation, which we've been enjoying for a couple of months, has stalled or has it just taken a break?

Hartman: Well, you have to look at a few months to really see a trend. March and April were actually a good deal better than May. So average it all out and employers are averaging, I don't know, maybe 130,000 private-sector jobs a month.

Ryssdal: Which doesn't sound so bad if we can keep that up.

Hartman: Well, actually, it's not really very good. It's just barely enough to keep up with the natural increase in the population. And plus, keep in mind, there are about 8 million people who lost jobs in the recession. Of course, a lot of those are looking. And some of them are also now coming back to look again, they might have given up for a while. And that's one reason why that unemployment rate, which went down in May, will probably go up again.

One person who's right on top of these numbers is Joel Prakken. He's at Macroeconomic Advisers. They're the ones who put out the monthly ADP report that counts private-sector jobs.

Joel Prakken: In a typical sort of recovery from a recession as deep as the one that we've just endured, you would expect to see monthly increases in employment that are measured in hundreds of thousands a month -- 300,000, possibly even a little bit more than that, for at least a while.

And Prakken explained the reason for that is employers usually cut back really hard on their most expensive cost, which is labor, when the economy is bad. That's so they don't just go out of business. And then business starts to pick up. And they suddenly have to add people right away. And a fair number of them just to get ahead of rising sales.

Ryssdal: So here's the rub though: If a regular recession usually leads to strong hiring coming out of it, why isn't this recession -- which has been deep and severe and horrible and all those words you can think of -- why hasn't that led to much stronger hiring?

Hartman: Part of it is just that the economy still isn't that strong. There's just so much to worry about: small businesses can't borrow, the banks are shaky, there's foreclosures. But there may also be something here about the way that employers are now thinking about labor that's new, about the number of people they actually need. Joel Prakken explains it this way.

Prakken: Businesses may have cut labor actually far more aggressively than turned out to be necessary. Having cut those employees, and discovered they could get by without a lot of them, it may be that you just discovered a one-time increase in efficiency that you're not going to be so quick to undo by hiring back workers too fast.

And we're seeing that in the fact that productivity's way up. Companies are churning out more widgets or websites or whatever per worker. And employers keep adding to people's work weeks. So people are working harder, they're putting in more overtime. And all of that allows employers to sell more stuff without actually adding jobs.

Ryssdal: And so we get reports like today's. Marketplace's Mitchell Hartman up at the Entrepreneurship Desk at Oregon Public Broadcasting. Mitchell is working, by the way, on a series about the effects of long-term unemployment. It's going to be on the air in a couple of weeks. Mitchell, thanks a lot.

Hartman: You're welcome.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.
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Wait, in the first five months there were nearly 1 Million jobs created but half of them were temporary census jobs. So less than 100,000 private sector jobs were created per month ... well under the 150,000 that is needed to balance out new job entrants in a growing population!

And in the decade of December 1999 to December 2009, 1 Million jobs were lost after figuring the 8.5 Million jobs lost from the Great Recession. So we are merely at the same number of jobs as New Year's Day, 2000 but with a larger population. :(

Why should the private sector be hiring when the government is doing everything it can to hurt the private sector? Higher taxes, more regulation, deficit spending that will have to be paid for sooner rather than later by higher taxes, tax breaks and other subsidies for politically connected businesses rather than for effective ones ... the list goes on.

Econ 101: jobs don't "come back". They are a creation of economic investment. If we expect more jobs, then we have to invest in ourselves, not in Chinese jobs.

Hartman's point about productivity is spot-on. The remaining labor and management at many companies (especially small ones) are only surviving by wearing multiple hats and taking work home. For many professional people, the 40-hour week is long gone, and we may never see it come back. I think it's just a reality that we have to come to terms with. For people like designers, writers, and other related skill-sets, freelancing will be the only way one may work without combining job descriptions.

The bigger question, in my mind, is what do we do with people with no skills? Where does the general labor force fit into the new employment scheme? Professionals can adapt and have portable skills, but as we've seen in the immigration debate, anyone can swing a hammer with a degree of success if it saves a buck.

No doubt jobs will only return in a cautious and halting fashion. This recession scared the hell out of all businesses. Consumer spending at 70% of the economy is unsustainable and it will return to 65% (or lower) as it was historically. Business and wages (labor) will have to obsorb this deflationary fact. "A cautious and halting recovery, it will be" Yoda

Dear Kai,

Check your basic math!! Somehow I do not understand how 431,000 minus 411,000
equals 41,000

While a faithful listener/reader of your program, and one of those beleaguered 2010 Census workers out there, I must point out that we are officially counters of housing units, and of how many people either live or do not live in them; ancillary, did the housing unit exist or not exist since 1 April 2010, i.e. burned, demolished,uninhabitable, etc., etc.

The real story about Census has been sadly missed.

JRL

Contrary to President Obama's assertions, the tremendous amounts of money that his administration has spent on so-called "economic stimulus" have done and will do no good. Politicians fail to realize that every dollar that is spent by the government is, in the long run, in some way, a dollar taken from the private sector - where it could have been used to create real jobs, rather than the government make-work jobs that have by-and-large appeared so far. The Keynesian theory of deficit spending being "good" for the economy is being shown as false and yet people fail to see it. Our economy will not see a true recovery until the underlying causes of the current recession are addressed. That means that the malinvestment in the housing market needs to be purged from the economy, the U.S. government needs to stop trying to entice yet more people to buy more houses which they cannot afford, and the Federal Reserve needs to allow interest rates to rise until they reflect true market rates - rather than artificially depressing interest rates by printing billions of dollars. Banks are not in a hurry to lend all of this new money because bankers understand to some degree the fact that none of the underlying causes of the current economic troubles we face have not been addressed. Indeed, the policies adopted by the Obama regime are the opposite of what are needed and, in the long run, they will only make the problems worse. Sooner or later the U.S. deficit will be seen to be a giant version of the current Greek budget situation. When that happens the resulting economic collapse will be much worse than it need have been had U.S. politicians done what was best for the country, not what was best for themselves. However, so long as people continue to believe President Obama's rhetoric there will be no course change and things will only get worse.

I don't think a lot of jobs are coming back.

Computers and the internet have made many jobs irrelevant. (They have also lowered tax revenue because there is far less exchange of tangible property. We need a system like Hawaii's that taxes all goods and services, as well.)

Jobs that once took many hours and many people are now performed with a few clicks of the mouse, or the push of a finger. Even jobs less dependent on computers, like agriculture and road construction, now use fewer people because large machines take the place of many workers.

We need to rethink the way our society functions. How do we take care of a large number of people when there are not jobs for them? What do they do? Who pays for them? (I know my thought: Since these large conglomerates and their bosses are getting filthy rich, we should tax them heavily and redistribute the wealth to those who are not benefitting. That's a start, anyway.)

What was the reason for previous boom cycle. Credit bubble that resulted in housing bubble. This in turn supported jobs like real-estate brokers, mortgage brokers and lot of others to support it. In addition all the people who withdrew money from equity spent it on stuff and that supported. Now people are not getting this cheap money and the bubble burst making people feel poor.

So let me ask marketplace, why do you expect those jobs to come back? They will come back only another bubble forms in some other asset class.

The "experts" continue to be baffled. First: no one who is on the front line of this economic disaster was at all surprised that there are hardly any new jobs being created by a traumatized business community. It's just another reason to apply real stimulus now, not compromised by tax cuts that don't get spent.

Second, business will eventually start hiring in pretty much the same configuration as they did a few years ago. Prakken's speculation (let's call it what it is) is wrong, because not being exposed to the "working wounded," he does not understand that American workers are not going to let themselves be jerked around for long.

Maybe a good remedy would be to shut down "research institutes," so they have to see what unemployment is like, and would not have so much time to guess what is going to happen.

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