The single biggest loser in this recession has been jobs.
By several estimates, as many as 8 million Americans lost their jobs in the past 18 months.
This number does not account for the hundreds of thousands of self-employed small businesses snuffed out along with the jobs in their communities. These losses are not accurately counted because there is no mechanism like unemployment insurance to track their status.
Economists peg the official unemployment rate at 9.8 percent. But if you account for the idled self-employed, along with job seekers that have fallen off-the-grid because of serial frustration, the real jobless number may be closer to 16.5 percent nationally.
Among groups such as African-Americans and Hispanics, some experts put the unemployment rate 10 points higher at closer to 25 percent.
There is no question that news in the employment sector is becoming less bad. Monthly job cuts fell in February to the lowest level since 2006, as companies announced plans to reduce payrolls by only 42,090.
Through the first two months of 2010, employers announced 113,572 planned layoffs. That is 73 percent below the pace established in the first two months of 2009, when 428,099 job cuts were announced.
According to an employment tracing report released today by ADP, jobs in the service sector increased by 17,000, while goods-producing industries cut 37,000, despite a gain of 3,000 in manufacturing jobs. It was the first increase in manufacturing jobs since January 2008.
Was the Weather at Fault?
Large businesses cut 10,000 jobs, small businesses cut 18,000, and medium-sized businesses (between 50 and 500 workers) added 8,000. Many analysts tracking the jobs market believe that the unusually severe weather that has hit the eastern seaboard along with the nation’s mid-section put a significant damper on hiring.
In a sign that manufacturing gains are starting to filter through the economy, hiring by U.S. service industries – the largest jobs sector – expanded in February at the fastest pace since October 2007. The Institute for Supply Management’s (ISM) index of non- manufacturing businesses, which make up almost 90 percent of the economy, rose to 53 from 50.5 the prior month. ISM readings higher than 50 signal growth.
The nascent rebound in factory orders that is helping the economy emerge from the worst recession since the 1930s is starting to generate improvement in other industries. As a consequence, hiring at major retailers like Macy’s is starting to thaw. The ISM’s measure of employment for service-related employment rose to its highest level since April 2008, another indicator that the recovery may be closer to creating the jobs needed to fuel more consumer-based spending.
While service sector hiring may be up, hiring in the manufacturing sector is still lagging. Rather than re-hire many who lost their jobs during the height of the recession, industrial employers have been content to ask more of the employees they retained. Overtime hours are up along with productivity numbers. Employers are trying to squeeze more out of their workforce before making the commitment to increase their overall payrolls. Old Man Winter may have chilled job growth in the private sector, but it did little to cool hiring by the government. Over the next several months, jobs generated for the decennial census will tally between 350,000 to 400,000 temporary hires. It appears census-related hiring jumped 50,000 in February.
Unless the economy starts picking up, once the census is complete, these workers will be back on the street.
The awful truth of this recession is that many of the jobs lost by the economy will not return. Hiring on Wall Street and recovery at the major banks may be underway, but this does not translate into hiring for the broader economy.
Washington lawmakers along with many leading economists fear that the economy may be in the midst of a “jobless recovery.” This may account for the Senate’s approval of a $15 billion jobs bill. The Senate bill now heads to the House where Democratic leaders are deciding whether to pass the Senate jobs bill or go to a joint House-Senate conference to reconcile it with the $154 billion jobs bill the House passed in December.
And Then There is Bunning
The Senate-passed bill includes a modest jobs tax credit and a temporary extension of the increase in the amount a business can write off in the year of purchase for new equipment. The jobs tax credit is a temporary combination new-hire payroll tax reduction/job retention write-off. The payroll tax reduction is based on hiring someone who has been unemployed for at least 60 days.
Under the provisions of the Senate bill, the company would not have to pay the employer share of the Social Security component (6.2 percent of wages) of the Federal Income Contributions Act (FICA) taxes for that individual. The provision provides a $1,000 tax credit if the employer retains the employee for a year and if the worker’s salary remains at 80 percent of the wages paid during the first 26 weeks of the employment.
Jim Bunning, the former big leaguer and retiring Republican Senator from Kentucky, has been at the eye of the storm on these issues. While Bunning has openly acknowledged the pernicious problems of permanent joblessness, he has been unwilling to let the federal government write another check he says it can’t cover.
The lanky righthander, who anchored the Detroit Tigers’ pitching staff for 12 years, was known for his fastball. But recently, it’s been his curve that has upended opposing batters.
Now a deficit hawk, Bunning blocked passage of legislation this week that would have funded tax credits for health coverage for those who lost their jobs, as well as unemployment benefits and federal highway and transportation projects. Although Bunning soon will be heading towards retirement, the effects of the ovation he has gotten for his stance will outlast his presence on the Senate floor.
Nearly every leading economist agrees that over the next two years, job creation resulting from additional federal spending may be critical to preventing a double-dip recession. But if lawmakers are not willing to make a more concerted effort to balance their books, what little support they currently have to continue stimulating the economy will rapidly evaporate.
John Cohn is a senior partner in the Globe West Financial Group based in West Los Angeles. He may be contacted at www.globewestfinancial.com
