Wednesday, May 26, 2021

Some Workers Reluctant to Return to Jobs

 Financial FAQs

“In the week ending May 15, the advance figure for seasonally adjusted initial (jobless) claims was 444,000, a decrease of 34,000 from the previous week's revised level. This is the lowest level for initial claims since March 14, 2020 when it was 256,000,” says the US Bureau of Economic Analysis.

Most of the decline came from a decrease in those getting benefits through pandemic-related emergency programs. States showing the largest declines included Georgia (-8,216), Kentucky (-7,175) and Texas (-4,828), according to unadjusted data. New Jersey showed the biggest gain, with 4,384.

Along with the steady slide in the headline number, the total of those receiving various government benefits tumbled by nearly 900,000 to just shy of 16 million, according to BEA data through May 1.

The high number still receiving benefits has caused 23 states to back out of the $300 weekly federal bonus checks as soon as June, with Florida being the latest state to announce it is canceling extended federal unemployment benefits. That'll cut off more than 3.6 million people from getting enhanced benefits related to the pandemic that Congress has authorized to expire in September..

State governors claim that this unemployment coverage discourages workers from taking jobs, citing labor shortages. Some economists and analysts disagree, noting that several factors are preventing people from finding suitable work, including lack of child care and fear of contracting COVID-19.

The 2 million person gap between Job Openings and actual Hires in the government’s latest JOLTS report is growing evidence that there is a red-hot demand for workers after what I call the pandemic recession, even with the high number out of work and still receiving benefits.

Why the record number of job openings at the same time so many are still receiving benefits? It will take time for workers to find suitable jobs, while employers need to raise their minimum wages for essential workers in the service sector (that are the lowest paid) to attract them back to work.

Service sector employers such as Amazon say they are raising their minimum wage to $15 per hour, while Bank of America is raising the minimum wage from $20 to $25 per hour for its clerical workers.

It is perhaps why a record number of small businesses said they could not fill open jobs in April, adding to a growing national controversy over whether extra unemployment benefits are keeping scores of people from re-entering the labor force.

Some 44 percent of small businesses reported job openings went unfilled, according to the National Federation of Independent Business. The NFIB is the nation’s largest small-business lobbying group.

It is less understandable why the red states are the first to terminate extra aid to their own lowest-paid workers before September, maintaining that it is keeping them from working in jobs that probably pay less than the weekly benefits (aid that is also free $$ to the states), as I said.

It not such a good idea because cutting off the additional benefits is exacerbating the income inequality that has been a major cause of record drug use and suicide rate among high school-educated white males that have lost formerly high-paying jobs in the rust belt.

It also tells us that red states governors, (such as Arkansas Governor Asa Hutchinson in a recent NPR interview), think little of the plight of Arkansas’ own essential workers that fill most of the lower-paying jobs after having weathered one year of pandemic hell.

The good news is that workers are now getting to pick and choose what jobs they would prefer. That is just one of the changes we are seeing as the 2020’s economy begins to roar.

Harlan Green © 2021

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Monday, May 17, 2021

Why So Much Inequality?

Answering Kennedy’s Call

There aren’t many economists that still debate the origins of our record income inequality, the worse in the developed world, and even in some of the developing world.

A loss of $10/hour in the typical worker’s compensation is the result of employers’ successful efforts to keep wage growth down over the past 40 years, according to a new paper by EPI distinguished fellow Larry Mishel and EPI director of research Josh Bivens.

Mishel and Bivens maintain that while productivity increased 69.6 percent from 1979-2018, employees’ compensation increased just 11.6 percent, per the EPI graph.

How did this happen? The obvious reasons are the growing strength of corporations and loss of labor union bargaining power that has allowed states to pass anti-labor laws and American corporations to ship many high-paying jobs overseas with little government regulation that would mitigate the job losses of domestic workers.

But it goes deeper. It goes back to the origins of the so-called economic sciences and the economic theories that politicians utilize to rationalize their policies.

They really derive from political economics, the original pseudo-science that attempted to understand human’s financial behavior, which is not that difficult to understand when we are talking about dollars and sense.

The owners of companies and the capital that controlled them wanted few regulations and lower taxes. So from 1980 onward Republican administrations and Big Business began to deregulation whole industries, and the labor lows and practices that guaranteed employees their fair share of the profits under what have been called Laissez Faire or free market economic theories.

Less government oversight and lower taxation, for instance, was based on the supposition that it encouraged greater growth, since corporations would create more jobs to produce more goods and services.

Industries have become more productive, but the increased profits were kept by the owners and chief executives of those companies rather than passed on to their employees; so much so that the gap has widened between employee’s hourly compensation and productivity that doesn’t guarantee the majority of service workers a livable wage.

That justified lower trade barriers in turn, so that consumers with their reduced incomes could afford the cheaper goods now made made overseas.

Even the Supreme Court got into the act by allowing public employees to avoid paying any fees if they so choose, even though receiving all the benefits of union membership—higher wages, pensions, worker safety, the list goes on and on.

The Supreme Court issued a sweeping ruling in 2018 that dramatically undermined unions for teachers, firefighters, police officers, and other public employees throughout the United States.

The case, Janus v. AFSCME, involved a challenge to the practice of public sector unions charging “agency fees” to employees who decline to join the union but who still benefit from the deals it bargains.

And twenty-eight states have ridden the free market banner that have “right to work” laws banning agency fees. Such laws create a free-rider problem: People don’t have to join unions or pay agency fees to get the unions’ benefits, so the unions lose members and political influence.

There is an ongoing dispute over how much of the economic pie should be going to workers vs. the owners of capital, but not the fact that it has happened. Our badly degraded infrastructure and a warming planet tell us that public works have been badly neglected that would prepare US for future catastrophes as well.

The ongoing political and economic debate is how to right the fact that most of the rewards of higher productivity have not increased the public good, but diminished it. Mishel and Bivens are helping us to see that labor must have a greater voice in that debate.

Harlan Green © 2021

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Wednesday, May 12, 2021

Job Openings Soar

 Financial FAQs


“The number of job openings reached a series high of 8.1 million (yellow line in graph) on the last business day of March, the U.S. Bureau of Labor Statistics reported today. Hires were little changed at 6.0 million (blue line). Total separations were little changed at 5.3 million (red bar). Within separations, the quits rate was unchanged at 2.4 percent while the layoffs and discharges rate decreased to a series low of 1.0 percent.”

In the arts, entertainment and recreation industry, vacancies increased by 81,000 jobs, said Reuters. Vacancies also increased in manufacturing, trade, transportation, and utilities industries as well as in finance. Job openings rose in the Northeast and Midwest regions. But vacancies dropped in the healthcare and social assistance industry.

There is a red-hot demand for workers after what I call the pandemic recession. So we are essentially at the starting gate of the next growth cycle with first quarter GDP already showing 6.4 percent growth.

So economic indicators will have crazy numbers until we reach herd immunity and everyone—including teachers, day-care workers and government workers—are able to return to work. There are still 2 million fewer women and 1.5 million fewer men in the labor force than pre-pandemic levels.

This Calculated Risk graph shows that companies are holding on to more of their employees with lower separations and quits, while last Friday’s unemployment report actually showed some 1 million new jobs were created, but just 266,000 above the normal seasonal rate of hiring.

The 2 million gap between Hires and Job Openings in the graph means companies are looking for workers. But it will take time for workers to find suitable jobs, and employers perhaps to begin to raise their minimum wages for essential workers in the service sector (that are the lowest paid).

A record number of small businesses said they could not fill open jobs in April, as well, adding to a growing national controversy over whether extra unemployment benefits are keeping scores of people from re-entering the labor force. The extra $300 in jobless benefits was extended to September in Biden’s $1.9 trillion American Recovery Act.

Some 44 percent of small businesses said job openings went unfilled in April, according to the National Federation of Independent Business. The NFIB is the nation’s largest small-business lobbying group.

And we have yet to see the enactment of an American Jobs Plan for massive infrastructure spending that will create even more jobs. Does that mean we have a labor shortage with more then 8 million still out of work who say they are looking for work?

There are supply bottlenecks while companies ramp up production again, and the inflation rate hitting new highs since the Great Recession. Will wages begin to rise as well from their lows of the last 40 years?

The consumer price index soared 0.8 percent to match the biggest monthly increase since 2009, the government said Wednesday. Economists had forecast a smaller rise. The rate of inflation over the past year jumped to 4.2 percent from 2.6 percent in the prior month — the highest level since 2008.

Wages have been held down for most workers by the rising power of corporations and weakening of labor unions since 1980. However, the trend is about to reverse as the demand for workers increases.

Will it cause the Fed to boost their short term interest rates? Fed Chair Powell doesn’t want to, but Treasury Secretary Yellen believes rates will have to rise if higher inflation continues.

Who is right? It is too early to tell. This also means the US economy is in for a wild ride this decade.

Harlan Green © 2021

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Friday, May 7, 2021

A Disappointing Jobs Report?

 Popular Economics Weekly

Not everyone is eager to go back to work, according to this morning’s unemployment report. The US economy added just 266,000 new nonfarm payroll jobs in April. Leisure and hospitality led the way with 331,000 jobs and governments added 48,000 new jobs.

“Both the unemployment rate, at 6.1 percent, and the number of unemployed persons, at 9.8 million, were little changed in April,” said the US Bureau of Labor Statistics. “These measures are down considerably from their recent highs in April 2020 but remain well above their levels prior to the coronavirus (COVID-19) pandemic (3.5 percent and 5.7 million, respectively, in February 2020).”

Transportation/warehousing and Professional/business sectors had 153,000 fewer jobs that would be normal for this time of year, since the jobs numbers are adjusted for seasonal factors. There was a pause in hiring in those sectors probably because they couldn’t find enough workers, since there has been no slowdown in business activity in both the manufacturing and service sectors of the economy.

This is in part because the government’s various aid programs are enabling more women to stay at home until their children go back to the slowly opening schools, and many of the 8 million that were laid off are still receiving good unemployment benefits.

The good news is that the size of the labor force grew by 430,000 in April to 161 million, close to the 164.5 million working before the pandemic when the unemployment rate was 3.6 percent.

“The shortfall in new jobs in April is likely just temporary,” said MarketWatch’s Jeffry Bartash in his comments on this morning’s disappointing nonfarm payroll report. “Falling coronavirus cases and massive federal stimulus have turbocharged the economy and job openings have surged. The U.S. is still set up for a summer of strong economic growth, especially if the coronavirus is mostly squelched.”

Employment by local governments also rose 31,000 in April as more schools reopened. Some very essential workers neglected until now—bus drivers, cafeteria workers and other personnel had been unable to work with schools closed, while employment declined in retail, health care, transportation and manufacturing, as I said.

Reuters’ ICAP says “The deceleration in payroll growth this month is not an argument for easier monetary policy.  As Chair Powell keeps reminding everyone, virus-related constraints are the key variable in the outlook.  For much of the past year, the major effect of those constraints was to restrict demand. Given the large number of employers who say they cannot find enough new workers, it is clear that the deceleration in hiring in April was not due to insufficient demand.”

This is only the beginning of what will be a decade-long recovery, with much of it to come from the just-passed American Recovery Act, and upcoming American Jobs Plan, a requested total of more than $4 trillion in additional government spending that will create even more good jobs.

The real question with all this stimulus spending is what will full employment look like in the years to come? Will there continue to be a labor shortage, for instance, with the current declining US birth rate and lower immigration numbers?

It must be one reason the financial markets are boosting tech companies’ stock values (i.e., NASDAQ). They are betting on a big 5G future need for more robots and Artificial Intelligence that will be needed to supplement what could be a looming labor shortage.

Harlan Green © 2021

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Thursday, May 6, 2021

The Age of Narcissism Is Ending

 Answering the Kennedys’ Call


The election of President Biden is bringing an end to the age of narcissism, or as Tom Wolfe titled it in 1976, “The ‘Me’ Decade”? Only 30 percent of adult Americans say they still approve of our former Narcissist-in-Chief in the latest polls since Donald Trump’s defeat in November.

Donald Trump epitomized what psychologists have described as a Narcissistic Personality Disorder (NPR). Psychologists Jean Twenge and W. Keith Campbell described in their 2009 book, “The Narcissism Epidemic”, the destructive effects of narcissistic behavior: the breakdown of institutions that bind families and communities, thus encouraging divisive and antisocial, short-term behaviors over long-term, collective decision-making.

There is much more to the definition, of course, but psychologists are in general agreement a person with NPR, such as former President Trump, has sociopathic behavior with an almost complete lack of empathy, or regard for others.

Dennis Shen, in a London School of Economics article maintains narcissistic behavior became prevalent in baby boomers and millennials, the Gen X and Y’ers born approximately between 1946 to 1980, as they focused on their own needs rather than the needs of others.

It was a sharp divergence from the post-Depression and World War II generations, when a rare consensus within America emerged, the result of existential crises in the form of the World War and looming Cold War.

“This post-war era of togetherness saw unprecedented economic stability and trust in the state as the steward of the people,” said Shen., “The nation backed global reciprocity, exemplified during the founding of the United Nations, Bretton Woods institutions and Marshall Plan.”

We now have a president who is explicitly restarting global reciprocity by rejoining alliances such as the Paris Accord on climate change, and restoring economic stability with a ‘new’ New Deal of Rooseveltian proportions—more than $6 trillion in government spending to ‘build back’ American institutions and programs designed to heal communities and families.

We also have a younger generation facing serious existential crises—diminished economic and educational opportunities, a deteriorating physical environment and polarized political environment that has endangered our constitutional-based democratic system.

And they don’t like what America has become.  Gen Zer’s (born after 1996) are more progressive and pro-government, most see the country’s growing racial and ethnic diversity as a good thing, and they’re less likely than older generations to see the United States as superior to other nations, said a recent PEW survey.

A look at how Gen Z voters view the Trump presidency provides further insight into their political beliefs. A Pew Research Center survey conducted in January of last year (2020) found that about a quarter of registered voters ages 18 to 23 (22%) approved of how Donald Trump is handling his job as president, while about three-quarters disapproved (77%).

"Millennial voters were only slightly more likely to approve of Trump (32%) while 42% of Gen X voters, 48% of Baby Boomers and 57% of those in the Silent Generation approved of the job he is doing as president."

So Americans are coming together again with the election of President Biden, who has asked “that we all do our part”—the younger generations in particular, who are reacting as did those of the Great Depression and World II when faced with existential threats.

Harlan Green © 2021

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