Update Unemployment, Manufacturing, and Jobs

June 21, 2013

Find A Job Friday.

We live in a world filled with mixed messages.

The FED says “…economic activity has been expanding at a moderate pace.  Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated. “

This is what the FED calls Labor Market Improvement.

This is what the FED calls Labor Market Improvement.

Parents and guidance counselors tell us that college is THE WAY to  well paid career, and yet recent college graduates have almost double the unemployment rate of the general population.

These rates are nothing to brag about.

These rates are nothing to brag about.

And student loans to repay.

This can't possibly end well...

This can’t possibly end well…

Nobody wants to work in a skilled trade any more

1000 High School students surveyed revealed their impressions of jobs in the skilled trades

  • 54 percent of young people believe there is a better future working in computers than working in skilled trades.
  • 37 percent of young people believe working in an office is more respected than working with your hands.
  • 25 percent of young people believe skilled trades jobs are old-fashioned.

Here are 4 reasons to find a job and a career in Precision Machining

  1. Executives at most PMPA member shops tell me their number 1 concern is finding skilled people to hire.
  2. If they found a candidate with the right skills, they would hire today, even if they didn’t have a current opening.
  3. Most Students at local community colleges’ machining programs have found jobs by the end of their first term, and by the time they graduate, all will have found a permanent placement according to students and instructors I have spoken with. This short video post shows the extent of jobs available and posted at Cleveland’s Tri- C Machining Class.
  4. Ninety-two percent of the respondents to PMPA’s monthly business trends survey for May 2013 are expecting prospects for employment to remain the same or improve.

We understand that there are a lot of confusing messages out there.

We know that the news makes it easy to  remain in the ranks of the hopelessly unemployed. After all , there are almost 3.1 unemployed workers for every job opening currently.

But we also know this, despite the graphs, and charts and opinions in the press, our industry is still looking for people with skills.

If you would like to get a job, start a career, and discover the joy of making safety critical parts that improve the safety and quality of life for everyone, you ought to consider a position in Precision Machining.

This link will help you find  training programs in your area that will give you what you need to start your career in advanced manufacturing.

Oh- and if you don’t believe me, how about the Chicago Sun-Times or Forbes

Unemployment Graph

Recent College Grads Graph

Crazy Student Loan Graph

Poll link


Why Job Growth Tanked In March

April 9, 2013

Guest post by Peter Morici.

Jobs Growth Tanks in March

Peter Morici

Twitter @pmorici1

The Labor Department announced the economy only created 88,000 jobs in March as many more adults quit looking for work than found jobs-for many Americans, good job remain tough to find.

EmployPopMar2013

The headline unemployment rate is 7.6 percent, but adding in adults who are discouraged and quit looking for work and part-timers, preferring full-time positions, the jobless rate becomes 13.8 percent. And, for many years, inflation-adjusted wages have been falling and income inequality rising.

Sluggish growth is one culprit-the Bush expansion delivered only 2.1 percent annual GDP growth-that’s about the same as the Obama recovery after 42 months. However, globalization and technological progress have wrought fundamental changes that rapid growth alone can’t fix.

Cheaper natural gas and rising wages in China make the United States more attractive for manufacturing. However, new factories require very few workers-engineers have applied the wizardry of handheld devices to factory automation with amazing results.

Similar progress has reduced many business support positions ranging from secretaries to travel agents. All, slicing demand for workers with a general high-school education.

Over the last decade, the same thing has happened to college graduates occupying middle management and similar professional positions. Consequently, college graduates have been taking jobs once predominantly filled by high school graduates-insurance agents and adjusters, retail managers, to name a few-and the earnings advantage of college graduates over less educated workers has narrowed.

Well paying jobs abound for college graduates in technical areas-accounting, engineering, nursing and the like-but not for those with degrees in liberal arts and general business. Similarly, high school graduates with some additional training, often through a community college, can find good jobs, for example, in the energy, medical, and hospitality sectors.

All this gives rise to widening income inequality between those who have specialized skills and those who don’t, and it imposes particular burdens on the two bookends of the labor force-recent grads and workers above 50.

Recent liberal arts graduates face particular difficulty getting that first decent job-such as in finance or the media-where employer training and entry-level experience combine to impart job-specific skills that permit them to climb the ladder.

Displaced older workers face much longer periods of unemployment, and many never secure positions that pay as well as the jobs lost.  Many are digging into retirement savings well before they are 65, creating an army of near-indigent elderly a decade or two from now.

To combat unemployment, the Federal Reserve has kept mortgage interest rates low, but this penalizes the elderly who rely on CDs and fixed-income investments. They are returning to work, often taking jobs and displacing younger workers.

Stronger growth would help and is possible. Forty-two months into the Reagan recovery, GDP was advancing at a 5.2 percent annual pace-that would bring unemployment down to five percent pretty quickly.

More rapid growth requires importing less and exporting more-dealing with the $500 billion trade deficit on oil, by drilling more offshore and in Alaska, and with China, by addressing its undervalued currency and protectionism.

Faster growth also requires right sizing business regulations to make investing in new jobs less expensive and time consuming. Regulatory enforcement is needed to protect the environment, consumers and financial stability but must be delivered cost effectively and quickly to add genuine value.

However, unless America wants to sell what it makes cheaply, like so many Asian economies, it must have a smarter, savvier, and better trained workforce.

Parents don’t want their offspring on the vocational track. Hence, high schools have become, overwhelmingly, college preparatory institutions, when it is possible to prepare many graduates to directly enter the labor force in technical areas.

College students don’t want the hard slog through nursing or engineering. Art history and economics are easier and less intruding on the social aspect of college. And universities are too much run by professors who prefer to contemplate the shortcomings of their civilization than train young people to build it.

In a nutshell, more and better jobs require pro-growth trade, energy and regulatory policies, and more realistic expectations among parents, students and the high schools and universities that train workers.

Peter Morici is an economist and professor at the Smith School of Business,, University of Maryland, and widely published columnist.

 


Unemployment Situation Is A Gooey Mess

January 30, 2013

Guest Post by Don Ake.

“The unique situations created by the Great Recession have rendered some traditional economic indicators unreliable.  And I believe that the indicator that has been impacted the most is the Unemployment Rate (U-3) reported by the U.S. Government.”

Don Ake is an MBA and adjunct professor and blogger over at Model T Stock Trends. Don follows the Transportation sector as a leading indicator for the economy and investing.

I find his down home charm and easy to understand explanations of economic arcana to be both informative and amusing. Here’s the rest of his post:

” This post was initially supposed to be an in depth analysis of the current (U-3) Unemployment Rate. Soon after starting my research, I found myself looking at a large pile of goo (if you are unemployed you may substitute “poo” for “goo” or probably a much stronger term).  There have been several articles recently about why the Unemployment Rate is not an accurate measurement of this labor market.  People are constantly trying to adjust the rate based on a single factor.  However there are many factors impacting the job market and these factors are very difficult to measure.

U-3 unemployment rate is a gooey indicator according to Don Ake.

U-3 unemployment rate is a gooey indicator according to Don Ake.

“Sure, you can still calculate the Unemployment Rate percentage, but it is now just a statistic. It is not an accurate indicator of the job market.  It is useless to put it on a historical chart.  The recessions of the past occurred primarily in a “blue-collar” labor force.  The recession hit, workers were laid-off.  The recovery begins and people returned to work, often at their previous jobs. But the Great Recession hit all workers and created some dynamics that are very different.

“The Unemployment Rate is greatly impacted by the number of people actively looking for work (the labor participation rate).  Many people have stopped looking for work, but for many different reasons.  For example, Fred the Engineer, age 59, was downsized from his job after 30 years with his company.  In previous recessions layoffs were based on seniority, but in the Great Recession they were based on salary.  Fred looked for a job, but nobody needs an aging engineer in a slow economy, so after exhausting his severance and unemployment benefits, he decides to retire at age 62.  He is not counted as “unemployed”, but he is a“forced” retiree and would gladly be working if a job were available.

“The labor participation rate is being impacted by these “forced retirees”, people going on “disability” due to the more lenient government standards, the discouraged workers who have temporarily stopped looking due to the tepid job market.  There are also“mismatched workers” whose jobs were eliminated by new technology and who lack the skills to function in the new economy. If these people are younger, they may drop out of the labor force to be reeducated, if they are older, they often become the long-term unemployed.  And of course you have the “benefit riders”that ride their benefits out to the end, before seriously looking for work.

“The great majority of unemployed people are actively searching for work and hate being without a job.  However, in 2011 a construction worker told me he wasn’t really seeking work because he was on the “Obama Plan” and was enjoying his extended unemployment benefits. Miraculously, he found a new job just weeks after his benefits ran out.  So yes, it is true as many others have pointed out: If you pay people to be unemployed, you get more unemployed people.

“Another factor that is difficult to measure is the thousands of college graduates of the last five years who cannot find jobs in their field of study.  They either have no job or are woefully “under-employed” which may mean a job in fast food.  The underemployed (which aren’t accurately measured) also include the “Fred the Engineers” who are not old or wealthy enough to retire and are working full time at the local telemarking firm.  It is taking some professionals longer than four years to return to work in their field.

Since the Unemployment Rate is currently of marginal value, we are left with the monthly jobs reports (from the government and ADP).  And this measures the number of jobs creted, not the quality of these jobs. Replacing a manufacturing job with a call center job is not an even swap.

“The latest government report said 155,000 jobs were created in December.  This rate of job growth is woefully inadequate to provide for the millions of people seeking work (or better work).  I am hearing about more layoffs and hiring freezes from my local contacts. And the current plan for creating more jobs is“there is no plan”.

“We need more precise information to better gauge and track the employment/unemployment situation. Employment surveys need to ask people the reason they are not seeking employment, if they would work if a job was available, and whether they are“underemployed” if they have a job.  There is an opportunity here for a university or survey firm to create a new index. Hey, that would even create a few more jobs!”

Unemployment Today is Structural Unless Cyclical Means

December 10, 2012

The reason everyone wants to describe our current unemployment situation as cyclical just might be because ‘cyclical unemployment’ is cause agnostic. Cyclical unemployment is defined as just “the deviation of unemployment from its natural rate. Link

Since it is just a variation, we need not look too hard for causes, it will go away.

Sandra Pianalta, Chairman of the Cleveland Fed,  and a member of the FOMC, is on record as saying that unemployment is cyclical:

Pianalto: I still believe that our current high unemployment is a cyclical problem and not a structural one. There’s been a longstanding relationship between the amount of growth in the economy and the improvement that it translates into in terms of job creation. We’ve had a very weak recovery that hasn’t created a lot of jobs. So the slow pace of this recovery is causing that unemployment rate to move down more slowly than we’d like.

I’m reassured that this issue is cyclical and not structural when I look at job openings. Prior to the recession, there were two individuals looking for every job that was open, so it was a 2-for-1 ratio. During this recession, that number has jumped to four people looking for every one job opening. So we just have a very slow pace of job openings, which, again, is cyclical, in my thinking.  Link

Structural unemployment is defined as a mismatch between skills demanded and labour available

Structural unemployment means the folks you can hire can't do what you need done.

Structural unemployment means the folks you can hire can’t do what you need done.

“Unemployment caused by a mismatch between workers’ skills and the skills needed for available jobs. Structural unemployment essentially occurs because resources, especially labor, are configured (trained) for a given technology but the economy demands goods and services using another technology. Employers seek workers who have one type of skill and workers seeking employment have a different type of skill. This mismatch in skills, largely the result of technological progress, creates unemployment of the structural variety.” Link.

Those of us trying to hire people with skills to operate our CNC equipment, people who can do math- trig, offsets, enter programs into controls, read vernier calipers- we know its a structural problem. We see and hear it in each interview.

Those college grads with all those student loans needing to be repaid can’t do these things.

Sure looks like “Employers seek workers who have one type of skill and workers seeking employment have a different type of skill” to me.

But I have a very smart (and modest) friend who suggested that I might be mistaken.

“Perhaps it is cyclical, ” he explained, “if the ‘cycle’ you’re referring to is 40 years of failure in public education, undermining the family as a social building block, the complete decoupling of executive compensation from everybody else, an eroding sense of the “public good”, the reckless expansion of easy credit, extremist positions on the social safety net, even more extreme positions on law, order, and incarceration (including drug policy) and, in some pockets, the fostering of contempt for empericism, all while the rest of the world gets leaner, smarter, and richer.”

Maybe he’s right. I’ll admit that our unemployment  today is cyclical,  if cyclical means 40 years of failure in public education, undermining the family as a social building block, and extremist positions on the social safety net that keep job seekers at home instead of job seeking and the host of other factors  he mentioned. These are the reasons our precision machine shops and advanced manufacturing companies can’t seem to find the skilled labor for which we have openings.

So  what’ll it be? Structural or Cyclical?

What'll it be?

What’ll it be?

Today’s unemployment problem is structural, unless you want to accept a 40 year cycle of failure in public education and culture.

Bartender

Diesel mechanics photo


Manufacturing Jobs: Separations vs. Hires

October 16, 2012

We like graphs because they tell the story without spin.

These trends are NOT being adequately discussed on the news.

Three out of three indicators agree, openings and hires are  down, while separations are increasing sharply.

The Bureau of Labor Statistics (BLS) reported that the number of manufacturing job openings dropped from 273,000 in July to 255,000 in August.

This is its lowest level since December 2011, with job postings declining for three straight months.

The other big headline for manufacturing is that net hiring turned negative. The BLS employment report  (link to NAM summary) showed that manufacturing jobs decreased in September for the second consecutive month.

In August, manufacturers hired 233,000 workers, down from 244,000 in July. This number is the lowest since June 2009.

At the same time, separations rose from 228,000 to 248,000. Separations include layoffs, quits and retirements.

This suggests net separations of 15,000 workers in August, a reversal of the net hiring of 16,000 observed in July.

So when you hear the rosy numbers from the media trying to “educate” you into thinking their way, why not ask them-

“Can I have a graph with that?”

“I’d like a Graph with that.”

Fast Food Worker Photo

Graph Courtesy of Chad Moutray, Chief Economist at NAM.


September 2012- Real Unemployment Story In Three Charts

October 10, 2012

The  single point in time, monthly headline unemployment rate is a not very useful leading indicator for people in the precision machining business. If anything it confuses people by its jumps and the fact that it indicates both people who found jobs AND people who quit looking in despair.

The following three charts give you a more useful idea about what the unemployment situation in the United States really look like.

14.7% U-6 Total unemployment / underemployment

As we have discussed before, the U-6 rate is the more honest and encompassing indicator of the unemployment situation. It counts the total unemployed plus all marginally attached  workers. (Marginally attached is Economist-speak for “part time employed because I can’t find full-time work that suits me.”

Civilian labor force participation rate- in decline for 12 years

If anyone has anything good to say about what this CIVPART chart indicates, I’d love to hear it. And so would a bunch of recent college graduates  currently unable to pay off their student loans.

While the population grows, the opportunities to work have not. More and more people are increasingly dependent on fewer and fewer people who are employed.

Note: BLS reports that the long term unemployment rate was little changed in September at 4.8 million, accounting for 40.1% of the unemployed.

The one oasis of employment that I know of is in the precision machining industry. Our shops are looking for talented people to operate our computer numerically controlled machine tools. If you can perform high school math and are comfortable with computers, you should consider a career in precision manufacturing.

Check it out here.

BLS LONGTERM

U6RATE

CIVPART

EMRATIO  58.7%, seasonally adjusted.


Why Isn’t The Invisible Hand Training Enough Skilled Workers?

October 9, 2012

The Invisible Hand Is NOT Training Enough Skilled Machinists.

(And by the way, neither are we.)

Estimates of as many as 600,000 unfilled skilled manufacturing jobs despite  years of unemployment over 8% just don’t compute. As a free market guy, I continue to be frustrated waiting for Adam Smith’s Invisble Hand to bring the trained workers our industry needs.

Have we done enough to pursue our own interest, so that society too can benefit?

Why isn’t the Invisible Hand working?

  • Has it been handcuffed by school bureaucrats who insist that college is for everyone? 
  • And parents who fail to critically think about the ROI and Debt obligations that a college degree means today?
  • Has the invisible hand been amputated by school board  and advisory council members who think that the trades is just a necessary evil for someone else’s troublemaker of a kid?
  • Do we have a need for public private partnerships like Right Skills Now to elevate the need for skilled tradesmen and to show advanced manufacturing as a viable, well paying career? Why is the US only in the 17th in Science or 25th in Math achievement worldwide?
  • Or have we as shop owners and machinists been missing  in guiding that invisible hand by concentrating on everything else except skilled workforce development?

What are you doing to develop the skilled workforce that you need?

Or are you waiting, like most shop owners over the last decade or so have waited, for someone else to train your crew?

Invisible Hand Graphic courtesy Micro Loan  Bank Kiva

A Few Good Workers originally published in Modern Applications News May 1999.


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