“Now … I got debts no honest man could pay/
The bank was holdin’ my mortgage and they was takin’ my house away.”
- “Johnny 99” by Bruce Springsteen
The latest jobs report, released in early March, reveals that new job creation rose from a revised January figure of 129,000 to 175,000 in February. This means that 46,000 more jobs were created last month than the month before. Sounds like good news, right? Well, as my son’s favorite sportscaster says each autumn Saturday morning, “Not so fast, my friend.”
Many economists view the total number of hours worked as a better measuring stick of the health of the U.S. labor market. As Ed Lazear writes in the Wall Street Journal, “An employer who replaces 100 40-hour-per-week workers with 120 20-hour-per-week workers is contracting, not expanding operations. … Thus, although the U.S. economy added about 900,000 jobs since September, the shortened workweek is equivalent to losing about 1 million jobs during the same period. The difference between the loss of the equivalent of 1 million jobs and the gain of 900,000 new jobs yields a net effect … of 100,000 lost jobs.”
There is growing sentiment in the economic community that the Affordable Care Act may be negatively impacting employment. Employers may be trimming employee hours in order to avoid complying with the mandates of providing health care insurance to full-time workers.
None of this is headline news to job seekers, the underemployed or to workers with reduced hours. The real news is that a high unemployment level is likely to accompany us long into the future. Our true current unemployment rate may be close to 12 percent.
Globalization cannot be ignored as a contributing factor. Homegrown manufacturing is retrenching in the U.S., but industries like call centers in India are not making their way back here.
Automation may prove to be the larger job killer. I read recently of a soft drink distributor in the American Southwest who employs only 10-15 percent of the personnel he once utilized. All other tasks are accomplished robotically.
Here’s the irony: For investors, this isn’t all bad. Companies that keep labor costs down are normally more profitable than those with higher costs, so corporate profitability is up. Share prices have risen. Dividend payments have been met and in many cases are increasing.
The problem is that as middle class jobs disappear, one wonders what will ultimately drive consumer spending, the largest contributor to GDP. And how then, if consumers stop buying, will the markets hold up? When the government is no longer pumping money monthly into the system through Quantitative Easing, will markets ignore a downtrodden job market then? Is there middle ground in this economic tug o’war between the economy and the markets? Time will tell.
Margaret R. McDowell, ChFC®, AIF®, a syndicated economic columnist, is the founder of Arbor Wealth Management LLC, (850-608-6121 or www.arborwealth.net), a “Fee-Only” Registered Investment Advisory Firm located near Sandestin. This column should not be considered personalized investment advice and provides no assurance that any specific strategy or investment will be suitable or profitable for an investor.
