Top 10 Reasons The Jobs Picture Won’t Improve In 2012.

The June jobs report was awful, and unfortunately it might just be the beginning of worse yet to come.   After a few months of mild to flat, stimulus-driven improvement the jobs market will again slip back into a malaise. I did some thinking about the jobs picture moving forward and here are ten reasons why things won’t get better any time soon.

  • Private-sector employees account for 70% of the workforce.   As more government jobs are cut, private employment will not bolster employment because it’s experiencing its own long-term slowdown.
  • U.S. companies have the money to hire, but they don’t need as many workers. Firms are learning to survive with fewer employees, relying more on increased productivity and efficiency.
  • When companies do have enough cash to spend, they put it toward new technology or M&A activity instead of hiring.
  • Many or those planning to retire are not now doing so, and furthermore, those that have retired are in some cases unwillingly re-entering the workforce.
  • Companies have been regaining profitability, but the increase is not mirrored in the labor market, widening the gap between capital spending and employment.
  • Many state and local municipalities that leaned on stimulus money to balance budgets and retain teachers, police, fire, and city works employees can no longer rely on stimulus monies.  Further, tax revenues are down significantly which will drive more downsizing.
  • Companies are producing more goods and services and the GDP is actually pretty strong.  So the economy is able to produce at this rate with 7 million fewer workers. Companies ask, “what’s’ the incentive to hire?”
  • A Bank of America Merrill Lynch report released in March stated inventory rebuilding, low borrowing costs and equipment tax breaks had encouraged companies to spend – not hire.  Further, the companies that are hiring aren’t doing so in the United States. They’re looking elsewhere.
  • America’s stubbornly high unemployment rate is not likely to drop much in the future because – among other reasons – the biggest employers in this country have been exporting jobs overseas.
  • The above shift doesn’t reflect a relentless search for the lowest wages, but instead a search for active consumers. Firms have become globalized around markets, not cheap labor. The era of globalization around cheap labor is over, and today firms go to Brazil, China, and India, because that’s where the customers are.

Just to recap, the unemployment rate rose to 9.2% in June from 9.1% in May, the labor force declined by 270,000, and the total amount of people out of work is up to 16.2%, from 15.8% in May.

Economists, in June expected an increase of 125,000 jobs, and not the paltry addition of just the 18,000 jobs.   Worse, May and April job numbers were revised downward to show a may gain of 25,000 versus 54,000 jobs added while April fell to 217,000 from 232,000.

Have a great week.


Posted on July 11, 2011, in Uncategorized and tagged , , , , , , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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