Wednesday, April 7, 2021

Thoughts On The Latest Jobs Report And Productivity

The Jobs report published last Friday blew through expectations with payrolls booming. Indications are that 916,000 jobs were added in March. Non-farm payrolls show America has now added back nearly 14 million workers into the workforce. This constitutes about 62 percent, of the 22 million jobs lost in the spring of 2020 when COVID-19 and lock-downs shuttered businesses across the country. This has dropped the unemployment rate back to 6%. The goal of this article is to get people to think about productivity and how it relates to unemployment.

It Is Important Workers Be Productive
As noted so often the official unemployment rate of 6.0% is somewhat misleading. It does not count the people who want a job but gave up or all the people with part-time jobs that want a full-time job. It also ignores all the people who dropped off the rolls because their unemployment benefits ran out. To get a clearer picture of the unemployment rate many people look at what is known as the U-6 number which stands at 10.7%. Both numbers would be much higher if not for the millions of workers that have simply dropped out of the labor force for a slew of different reasons.

It will be interesting to see how many of  the remaining 8.4 million jobs lost come back considering many small businesses have closed forever. Obviously, last month’s $1.9 trillion stimulus bill and its potential to create demand has made many employers enthusiastic about better times ahead. While the stock market and other assets have soared with the constant infusion of stimulus from the Fed and Washington, the economy of Main Street has not fared as well.  

Since small businesses employ over 54 million people in America and their importance in the economy should not be underestimated.

In April of 2020, I pointed out in an article that small businesses employ well over half of the nation's private workforce. As predicted, government employees and bureaucrats were taken care of, they continued to get paid but small business, the most productive part of the economy has had a knife to its throat. As a landlord and small business owner, I can tell you the programs structured in Washington to help small businesses was a big fail and what they allowed to happen after that almost criminal. Washington has become so attuned to dealing with lobbyists from mega-companies it has lost sight of the fact small is small, and when this comes to business, this means usually under twenty employees, not hundreds. 

Productivity Is Important
Now that the latest job report is out, here are a few thoughts on productivity, the workforce, and the economy. Covid-19 and the way it has been handled has taken a far greater toll on productivity than these numbers imply. It is difficult to think people donning a mask and busy washing their hands are anywhere as productive as those focused on work. Only a return to more normal practices can neutralize the damage to productivity government mandates have caused. 

The introduction of practices used to halt the spread of the virus including limiting contact during the transfer of goods and services has made it harder to efficiently go through the day. Government offices being closed, schools going to online teaching, increasing the space between tables in restaurants, and more, do little to add to efficiency. I contend, much of what statistically appeared as growth in productivity was merely a number generated by those reporting far fewer employees in the private sector still kicking out about the same number of sales as stimulus money buoyed the economy.

Workers Waste A Great Deal Of Time

While government is seldom efficient and has little incentive to be so, productivity is a factor all businesses strive to keep high. Also playing into the productivity picture is that going into the pandemic, due to the low employment rate, many companies were forced to carry extra employees on their staff never knowing when one leaving would create a huge hole in their company. A great deal is hidden within the employment statistics. Some of the biggest factors feeding into the job situation are the huge number of people leaving the workforce, the type of jobs that are now coming back, and even how jobs are counted. Believe it or not, if you don’t have a job and fail to look for one, you are not considered unemployed, but instead, you are considered to have dropped out of the labor force.

Many of the jobs now coming back are low-paying service jobs, this includes those in leisure and hospitality. Another thing we should consider is that many of those jobs reported as "coming back" never really totally left but rather carried on in the shadows. Another way to say this is many people carried on part of their daily work on the side or in what might be described as the "underground economy." In this case, work was being performed but not accurately reported. This is another reason we should not get overly excited by the news of "base" jobs returning, it was expected and is coming at a great cost and is the result of trillions of dollars being pumped into the system.

All in all, it is difficult to believe that workers are now more productive considering supply chain disruptions and a slew of other roadblocks that have appeared to disrupt our day. Even things like spending more time looking for replacement parts or people working from home has taken a toll and affected our productivity. An example of this is evident when trying to communicate, in the past calls that were often answered now dead-end into voicemail and the recipient never gets back to the caller.   

The fact is productivity is a strange animal and the way we choose to measure it has a great deal to do with the findings. Overall, these numbers are still very "messy." To retain a proper perspective we must factor into the employment numbers that in the household survey if you work as little as one hour a week, you are considered employed. It could be after all the money the government has thrown at workers sitting at home during the pandemic many of these people have grown accustomed to a life of leisure. It would be naive to think all workers will be rushing to return to work willingly and with great enthusiasm. 

How this all flows into an economy floating on a sea of recently promised money that has spiked consumer confidence and spending has yet to be determined. This money is expected to last at least through the summer. With workers wanting big increases in wages, expect to see prices being raised. How much small businesses and productivity will benefit from this spending is still in question. The bar has been moved, this is a far different kind of economy than we have witnessed in the past.  


(Republishing of this article welcomed with reference to Bruce Wilds/AdvancingTime Blog)

1 comment:

  1. Economist, John Williams from has the real unemployment figure at around 24-28%.