Posted by
crosspatch on Thursday, July 03, 2008 11:52:07 PM
Well, first of all, it has been a long time since I wrote a blog entry here. Life has been hectic with the tragic loss of a spouse, suddenly being a single parent of two elementary schoolers, and changing jobs in the middle of that adjustment. But we adapt and life goes on. Now to blogging!
I thought something was fishy with the employment numbers released today when all I heard on the radio on my way home from work was that the US "lost" some 60,000 jobs but no mention was made of the unemployment rate. So I went and looked it up a few minutes ago and as I suspected, the unemployment rate was unchanged from last month. How, you might ask, can the economy "lose" 60,000 jobs and the employment rate remain unchanged? Easy; companies are cutting unfilled positions. They are eliminating jobs that they have been unable to fill. And this phenomenon is going to become more common as more of the "baby boom" generation retires. We are going to see a period where workers will be leaving the workforce at a faster pace than people are entering. In other words, the reverse of the situation we saw in the 1960's and 1970's when we had more people entering the workforce than the economy could absorb and saw rising unemployment.
All of the reports seemed to be grasping for bad news. They were along the lines of "while unemployment remained steady at 5.5%, May's rate jumped by the largest amount in ...". In other words, they had to reach back a couple of months and regurgitate May's bad news.
The perceptions of what constitutes a good economy and what constitutes a bad economy were formed back when we had the largest single generation of Americans in history in the job market. That generation is now on its way to retirement. A 5.5% unemployment rate is right at the edge of "optimal" unemployment rates. 4.5% to 5.5% is considered the desired range that is sustainable over time. The double digit unemployment rates of the late 1970's is apparently gone from the American memory.
The loss of jobs when an economy is losing workers is actually a GOOD thing. You do not want a situation where unemployment drops much below 4.5% because then there aren't enough workers "between jobs" for business to hire new workers simply to replace ones that leave over the normal course of career advancement. Below 4% you get into a situation where businesses begin to "bid up" salaries in order to attract what labor you can get and that labor is probably less qualified because at that point, all the people who are sharp at what they do are already working. That was the situation in Silicon Valley during the dot-com bubble. Companies could not find workers at any price and the salaries being paid to even entry-level employees were through the roof. That situation is not sustainable over the long term for an economy as a whole. What actually happens is that companies start trading workers around as they bid salaries up.
So today's unemployment numbers really aren't such bad news at all. Business cut 60,000 jobs but they were either unfilled positions or a corresponding number of people who had been out of work in May had been able to start new jobs or a combination of both. The place where I work added two new job openings in the past month and we have two positions to fill due to people changing jobs on their own.
The retirement of the baby boom is going to challenge all the notions we have about economics. We are going to see people retiring in droves within the next few years. Businesses are going to have a hard time finding the labor to fill those positions.
Happy Independence Day!