The article cited below ( A Good Worker is Hard to Find) is one of many that shows once again why we should not read or listen to the press. I used to think the Wall Street Journal was different but that was then and this is now.
https://www.wsj.com/articles/a-good-worker-is-hard-to-find-11622845855?mod=hp_opin_pos_1
My spleen is over-running today because of all the fuss over the employment number for May 2021. The main theme is this. The BLS reported an increase of 559,000 private sector jobs for May of 2021. You would think that the press would have been ecstatic with Andre pseudo corks popping everywhere. But no. Not our press. Harrumph.
Why ecstatic? For one thing, employment rose by only 278,000 in April. Or maybe the fact that employment in 2020 fell by 9.4 million jobs. Wouldn't you be happy if after your weight rose by 94 pounds, you soon lost about 15 pounds? Should you have lost all 94 pounds? How many pounds should you have lost?
Apparently unnamed economists had met these journalists in a smoky bar on a unnamed street and told them that May was going to be the big month. Place your bets on employment to show in May. I guess they all expected at least 660,000 more jobs.
All that got me thinking about jobs numbers. So I went to bls.com and downloaded monthly private sector employment statistics for each month from January 2010 to May 2021.
My first thought was that jobs numbers ought to be stable -- not like stock prices careening all over the place. And that is true. In every year since 2010, employment was higher in December of each year, except for December 2020 and Covid. It was higher each December by about 2.4 million jobs. Those one-year employment increases ranged from 2 million in 2019 to 3 million in 2014. Pretty stable stuff.
But then all that came to a screeching halt in 2020. Covid made employment in 2020 look like a wet firecracker contest. In April of 2020 alone, employment fell by almost 21 million jobs. That cliff fall was followed by several months of gains and then the year ended with a jobs decline of 306 thousand jobs in December 2020. In 2020, there were 3 months of jobs declines and 9 months of increases.
So far with five months of data for 2021 we see some numbers more like the past. We have had five months of employment grains averaging about 500,000 jobs per month. Compared to the past average of about 200,000 jobs gains per month, those 500,000 jobs per month were pretty high but one would expect such large gains as we return to post-Covid normalcy.
Okay, so why haven't we made up for those huge job losses of 2020? Maybe the press and the unnamed economists should show some patience. A number of 559,000 in May sounds pretty darn good to me.
We should keep in mind one thing. If you face a catastrophic challenge and get through it, then maybe you won't go back to living the same way you lived before the incident. What is normal in our future may be quite different from what used to be normal. Covid has taught us that there are a lot of ways to live and a lot of ways to make money that we might have never considered before 2020.
Ask all those arm-chair economists what models they are using to convince us that we should be disappointed in May's near 600,000 job increase. What do they know about the future that we don't?
One of the challenges of today's managers is effectively tuning the workforce to the best guess of market demand for whatever the going forward product or service is. There are many limitations on rapidly making changes to existing work forces, e.g. labor contracts, pension guarantees, tenure, seniority requirements that don't match with layoff or reduction plans relating to skills impacted, diversity agreements, veiled employee promises, and plain old fear of HR based litigation. Covid has provided a detour to all the traditional limits on management. Reduction in Force (RIF) plans were executed as a consequence of the pandemic and management is now in a position to rethink how reengaged they want to get with selected employees who might have been difficult for a myriad of reasons to surplus previously. We should expect management of all kinds of enterprises to be quietly rethinking whether they need everyone who was on payroll, whether this is an opportunity to change the skills mix, whether the digital workplace has some stickiness and the cost reductions associated with it should be long term gains--a host of strategic thinking that makes simply looking at numbers potentially under-reading the story. These are the behavioral elements of the equation which often create challenges for the economist.
ReplyDeleteThanks Ed. I couldn't agree more. The usual macro analyses of employment don't work now. A lot going on both sides of the equation with labor demand and labor supply. We are going to have to wait and see.
DeleteI would add one other additional thought to the issues facing product managers, although there is an effect on service sector issues as well. I think that many enterprises--large and small--are rethinking distribution strategies in the continuing face of international shipping complexities, growing fears of dependence on off-shore manufacturing, strategies that were popularized by the ever optimistic "just-in-time" approach to inventory management, and the market demand to have goods in customers hands almost on an "on-demand now" basis. The aggregate effect of these trends is to steer clear of labor based solutions and increasingly move toward applications like robotics and locational approaches to distribution sites and channels that necessarily need to be proximal to the largest portion of a customer base. I see increased product specific cost that may have to be offset by a reduced dependence on human labor. This may serve to further aggravate the unemployment numbers for the least skilled in our society as well as expand the wealth gap and further strain the dependence on government support. Potentially not such a pretty picture.
ReplyDeleteNot a happy picture. Reminds me of stories about tractors and Ag workers; Ford's automation and auto workers. In the past, markets seemed to adjust, however slowly and imperfectly. But now, its hard to imagine markets working when government gets in the middle. Maybe the only solution is population growth. If we can't employ people then maybe we should have fewer of them.
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