Figuring out the jobs mystery is a not-so-little job itself

March 07, 2004|By JAY HANCOCK

THE U.S. economy rolled deeper into unknown territory last week. For those of us on board, things are getting more than a little weird and scary.

On Friday the nation posted another month of miserable job growth. Payrolls expanded by only 21,000 jobs for February, a puny portion of the 125,000 jobs expected by some very smart Wall Street economists.

America is no stranger to meager employment gains and occasional jags of overall employment loss, but we're supposed to be in a recovery, for crying out loud.

Gross domestic product, which tracks the output of goods and services and is the most widely accepted gauge of economic health, has been growing at a scorching, 1999-style pace. But corporate hiring departments have turned out the lights.

The official "recovery" from the 2001 recession is more than 2 years old, but the United States has 718,000 fewer jobs than when the recession ended. What recovery?

We've never seen anything like this. Not since the government started counting jobs in 1939 has the nation increased its gross domestic product by this amount and for this long with so little to show in putting people to work.

Frodo, I don't think we're in Hobbiton anymore.

What would the jobs picture look like if GDP were shrinking?

Many people expected some sort of "jobless recovery" as the nation recuperated from the popped stock bubble and the terrorist attacks, but this is ridiculous.

The term "jobless recovery" was coined a decade ago after corporations seized on computerized productivity improvements to increase output without adding proportional numbers of workers.

But the jobless recovery of the early 1990s lasted only about a year and a half -- from the recession's end to when the economy started adding at least 150,000 or 200,000 jobs a month, which is the minimum analysts believe is needed for sustainable growth.

This jobless recovery is 27 months old with no end in sight. At February's rate of growth it'll take until 2013 before the United States boasts as many jobs as it had in March 2001, at the peak of the previous expansion.

"This is bad news. I don't even know where to begin," University of Maryland economist Peter Morici said Friday after looking at the jobs report. "We're not getting the normal multiplier effect" that usually comes with economic expansion.

Some 8 million people were jobless in February. It would have been higher, but many folks are so discouraged they've given up looking for jobs -- "left the work force," in government parlance. They are not counted as unemployed, which is why the jobless rate stayed at a deceptively low 5.6 percent.

The average duration of unemployment in February was more than five months -- the longest since 1984.

Everybody's confused. The stock market first fell on Friday -- no jobs. Bad for consumers. Then it soared -- low interest rates forever! Then it slumped into bafflement.

The National Bureau of Economic Research, the semi-official arbiter of business cycles, doesn't even know what a recession is anymore. First it decided job growth was the hallmark of business expansion. Then last October it declared GDP growth was what really mattered. Don't be surprised if it starts having third thoughts.

One explanation for the jobless riddle is technology-driven productivity. As in the early 1990s, automation and centralization are allowing companies to churn out more products with fewer workers.

But there can be little doubt that the transfer of U.S. jobs overseas is part of the equation. Manufacturing positions have been moving to Mexico and Asia for years. But now, thanks to the Internet, service jobs such as insurance processing and tech support are shifting overseas, too.

That's surprising and worrisome. Service jobs were supposed to be more or less bulletproof against foreign competition.

But then, what else is new? Surprising and worrisome are what this economy is all about. Nonimportable products have become importable. Output grows while employment doesn't. Wage and salary growth is almost flat. Profligate government spending and the lowest interest rates since the 1950s haven't helped.

We need a map to tell us where all this goes. But there isn't one.

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