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News In Brief

July’s job numbers: If companies are profiting, why aren’t they hiring?

Melissa Kaplan Aug 6, 2010

Reporter Mitchell Hartman filed this while covering today’s jobs data:

Scrambling to cover the monthly unemployment report this morning, we were trying to catch the long-term trend. Past the 140,000 laid-off census workers whose jobs were temporary anyway, which skew the monthly number negative, we’re left with an uncomfortable fact. Month after month, the economy is creating fewer than 100,000 private-sector jobs. In May it was 51,000; in June, 31,000; last month, 71,000.

Economists routinely tell me we need to create at least 200,000 new private-sector jobs every month–perhaps more–to start eating away at the unemployment rate, still near 10 percent. And the long-term unemployment problem: nearly half of the unemployed have been looking for work for 6 months or more–a historic high. And the total unemployment rate, including discouraged workers–now at 16.5 percent.

My editor asked me: if the economy is in recovery, if companies are making money and getting new orders and spending on plant and equipment . . . how come they’re not hiring? Bernard Baumohl of the Economic Outlook Group offered this answer:

“Workers these days are being used more as inventory, rather than being considered long-term assets to companies. When you need them, hire them. When you don’t need them, just let them go. And that flexibility is something companies value more and more.”

Of course, as Henry Ford knew, without steady long-term employment, workers can’t buy stuff. Without people buying stuff, companies don’t do as well. In the long run, by moving to the “inventory model” of labor, companies may be eating their own future lunch.

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