November 2006 Archives

Unemployment in the U.S. is calculated from a Current Payroll Survey (CPS) of 60,000 households performed by the Census Bureau for the Bureau of Labor Statistics.  The survey determines who has a job, who wants a job, who is looking for a job and has for the past year, and more.  Then the Census folks calculate from the entire population the size of the labor force and the number of people who want work and for all those reasons can’t get it, and that becomes the Unemployment Rate.

Some think that the number of people applying for unemployment payments is used to calculate unemployment and that’s not true.  It is another measure of the strength of the economy, relating to how many people have recently lost jobs.  For example, in Nov 18, 2006, rose by 12,000 to 321,000.  Argus Research Corp reported in a KC Star article by Jeannine Aversa of the AP that the problem comes from the “struggling auto industry…. .that has slashed jobs, companies in the homebuilding industry and furniture making and real estate all have let workers go.”  Retailers also, even at this season.

As we’ve seen in the election cycle silly season a lot of claims were made by candidates and the administration in support of candidates.  Some is interpretation but a great deal of that is pure “spin.”  Make the reality look better than it is.

As of the end of the 3rd Quarter in 2006, let’s look at the numbers for the Unemployed:

There are 120 million full-time workers and 24.6 part-time workers.  For purposes of calculating unemployment, as strange as it seems, each is equal to the other.  One employed part-time worker counts as employed, just as the full-time worker does.  That creates a workforce of 144.6 million people.  4.6% of the full-time workers are Unemployed and 5.3% of the part-time workers.  Yet the federal government administration says that “the Unemployment rate fell to 4.4% last month, the lowest in five years.” 

Go inside those numbers a bit:  Of the Unemployed, 5.7 million are seeking full-time work and 1.4 million are seeking part-time work.  That adds to 7.2 million Unemployed, and with a workforce of 144.6 million, that’s a 4.9% Unemployment rate.  Go to this BLS site to see these numbers:  ftp://ftp.bls.gov/pub/suppl/empsit.cpseed4.txt

Also you can see that those aged 16-19 seeking full-time work have an Unemployment rate of 24% and those in that age cadre seeking part-time work have an Unemployment rate of 12%.  For anyone who is out of work and is not seeking work, they know the rate is 100% for them. 

The BLS reported that of those who are Unemployed, 2 million searched for work in the past year, 300,000 were discouraged, and 1.2 million believed “no work was available,” “they could not find work,”  “they lacked the necessary schooling or training,” or “the employer thinks they are too young or too old.”  See that at:  ftp://ftp.bls.gov/pub/suppl/empsit.cpseea38.txt

There have been 134,816 mass layoffs (>50 workers in each operation) during the period of July 1 thru Sept 30.  The reason for the layoffs, as reported by the BLS on 11.16.06 were:

  • Contract was completed: 28,000
  • Seasonal work: 24,627
  • Reorganization within Company: 21,159
  • Slack work: 14,522
  • Business Ownership Change: 8,683
  • Financial Difficulty: 5,639
  • Not Reported: 5,249
  • Bankruptcy:  4,816

236 people from Shaw Industries in Stevenson, Alabama will be laid off near the end of this year.
EMC announced it was laying off 1250 jobs from its American operations.  Unaffected were the New Zealand and Australian plants.

Employees at two condom plants in east Alabama are being cut back.  Tough times are forcing Alatech Healthcare to lay off employees in Eufaula and Slocomb.

The Eufaula plant has been supplying products since the earlier nineties and some say job loss affects the entire community.  "We already have a really slow economy here and we need more jobs brought in, not taken away," said Erica Peacock, Eufaula Resident. 

In two weeks nearly 150 people from the Eufaula and Slocomb plants will be out of a job. The company says its largest customer, the United States Agency for International Development (USAID) is taking part of their business to China and South Korea.  "They cut our order in half, therefore this has forced us to cut back our staff," said Larry Povlacs, Alatech Healthcare President. 

Employees were told two months ago who would be affected by the layoff.  Povlacs says after the lay off only 45 employees will be left in the Eufaula plant and 65 in the Slocomb plant.  Alatech hopes they can call back some employees if business picks up.

You know you need a Fallback Position if condom sales are dropping and people are being laid off from their plants.  And if your government is outsourcing orders to Asia.

You really have to pay attention to the political spin on employment numbers.  Vice President Cheney on ABC’s This Week today said the economy is doing very well, with unemployment at 4.4% and 6.8 million jobs created since 2003.

The facts are not quite that simple.  In October 93,000 jobs were created, in September 105,000, and in August 80,000.  The BLS estimates it takes 150,000 jobs a month to be created to not have more people unemployed, because that many people enter the workforce. So 450,000 jobs were needed the past three months and 335,000 were created, meaning 115,000 were not able to get jobs.

Our workforce is 143 million people. 4.4% of that means that 6.3 million people are unemployed, not counting the abovementioned newbies in the workforce.  But it’s been estimated there are another 4 to 5 million who are not counted.  That gets you to 10.3 to 11.3 million unemployed.  Dividing that number by the total workforce and you see a real rate of unemployment of 7.2% to 7.9%.

The Vice President then went on to try to scare the voters against voting for Democrats because they “will raise your taxes.”  George Stephanopoulos tried to get him to detail it and he said “they don’t have to take action, they can just let the Bush tax cuts expire.” 

George then added, “in 2011.”

Then the Vice President went into a litany of all the tax cuts that would expire if not extended.  But he didn’t refute we’re talking about 2011.  And there are two election cycles before that happens.

George asked why the Republicans, who are in control of Congress, didn’t move to cut the increase in student loans that automatically increased the past year.  VP Cheney didn’t answer.

The Financial Times on 11.03.06 in an editorial titled, “Politicians must focus on middle America” said this:

“The Republicans have presided over a period of exceptional economic growth.  Yet this will not, apparently, win them next week’s mid-term elections.  This is only partly because of the chaos in Iraq and the scandals that beset them.  It is also because middle –income American families have gained so little from the surging economy.

They went on,

“The administration is not responsible for what is happening.  The driving forces are, instead, global and long-standing.  But this does not make the emerging gap between ordinary workers’ productivity and their pay any less of a political challenge.

“Between 2000 and 2005 output per hour worked in the business sector  increased by 17 per cent, while the median hourly wage rose by only 3 per cent.  The total real income of the median household is lower than in 2000, when President George W. Bush was first elected.”

“Trade benefits the economy as a whole, but not everybody.  If the open-ness of which the entire world economy depends is to be sustained politically, winners must be willing to share more of the gains with losers.”

“…in particular, Mr. Bush’s tax cuts of 2001 and 2003 predominantly benefited the rich.”

The New York Times in today’s editorial said this:

“On Tuesday, when this page runs the list of people it has endorsed for election, we will include no Republican Congressional candidates for the first time in our memory…..Our only political loyalty is to making the two-party system as vital and responsible as possible.

“That is why things are different this year.

“To begin with, the Republican majority that has run the House—and for the most part, the Senate—during President Bush’s tenure has done a terrible job on the basics.  Its tax-cutting-above-all-else has wrecked the budget, hobbled the middle class and endangered the long-term economy….

“Republican leaders…have developed toxic symptoms of an overconfident majority that has been too long in power.  They methodically shut the opposition—and even the more moderate members of their own party—out of any role in the legislative process.  Their only mission seems to be self-perpetuation.

“The current Republican majority managed to achieve that burned-our, brain-dead status in record time, and with a shocking disregard for the most minimal ethical standards.  It was bad enough that a party that used to believe in fiscal austerity blew billions on pork-barrel projects.  It is worse that many of the most expensive boondoggles were not even directed at their constituents, but at lobbyists who financed their campaigns and high-end lifestyles.

“The fact that the White House, House and Senate are all controlled by one party is not a threat to the balance of powers, as long as everyone understands the roles assigned to each by the Constitution.  But over the past two years, the White House has made it clear that it claims sweeping powers that go well beyond any acceptable limits.  Rather than doing their duty to curb those excesses, the Congressional Republicans have dedicated themselves to removing the restraints on the president’s ability to do whatever he wants.

“Congress…has failed to ask probing questions about the war in Iraq or hold the president accountable for his catastrophic bungling of the occupation.  It also has allowed Mr. Bush to avoid answering any questions about whether his administration cooked the intelligence on weapons of mass destruction.

“This election is indeed about George W. Bush and the Congressional majority’s insistence on protecting him from the consequences of his mistakes and misdeeds.”

The Bureau of Labor Statistics reported on Friday that unemployment had dropped to 4.4%.  What’s not noted in those administration-touting numbers is the number of people who have quit looking for a job and those who are not reported as looking because their unemployment benefits have run out.

The downturn in housing construction will soon affect the numbers by adding to the unemployed.  Merrill Lynch, it was reported by Paul Krugman in his column of November 3, has predicted that the unemployment rate will increase to 5.8 % by the end of the year.

The other factors affecting employment numbers are (1) the overall state of the economy, which most analysts say is okay, but not exciting, with growth of 2.0-2.5% down from past years of 3% to 4.5%, (2) interest rates are pretty stable, with the Fed holding steady and expecting to, and (3) productivity, which is the amount of output each worker generates, and that rate of growth is lower this year from past years, but the substitution of technology for labor and outsourcing don’t speak well for job growth.

Everyone needs to be prepared for job loss.  The world of work continues to be changing.

U.S. Labor Secretary Elaine Chao announced a new grant program aimed at displaced autoworkers in Missouri, the KC Star reported.

Called Career Advancement Accounts, the provide workers with $3,000 for one year of job training assistance, for up to 500 workers.  The grants can be renewed for another year, making them worth $6,000.  The money is to be used for tuition, books, and fees.

These may apply in other states as well.  The Star didn’t report on that.

Something to be added to your fallback position.

The outplacement firm Challenger, Gray & Christmas, which tracks layoffs by industry and time period said that in October planned layoffs were down from September and nationwide year-to-date are down compared to last year at this time.

September’s layoff numbers were 100,000 and October’s dropped to 69,000.  YTD we’re at 708,000 layoffs compared to 864,000 last year.

Retailing and the auto industry continue to lead in layoffs.

The head of Wipro, the Indian firm specializing in taking outsourced jobs from the U.S. said that the U.S. faces more shortages of technology skills than does India.   Azim Premji said the problem was the U.S. educational system abetted by the strict immigration policies.  The Financial Times reported he said “Engineering is not growing talent and that is a cause for concern.”

The U.S. produces about 70,000 engineers a year, compared to 400,000 in India, the Financial Times reported.

Commenting on the report in the Times, the head of the International Center for Leadership in Education, said:  “The problem is not that our schools aren’t what they used to be; the problem is that our schools are what they used to be.”  Willard Daggett is the President of the ICLE.

Bill Gates of Microsoft fame has been warning about the “evaporation of interest in computer science” for two years.  The head of GE, Jeffrey Immelt said that the “U.S. is on its way to become the massage capital of the world” with more students graduating in sports sciences than in electrical engineering, reported the Financial Times.

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