Thursday, February 24, 2011

Obama’s Failure on Jobs

President-elect Obama set a goal to create 2.5 million jobs in the first two years of his administration, which he revised upward to 3 million in the early months after taking office. When he made his pledge in December 2008 the seasonally adjusted monthly average for jobs was already down 3.6 million from December 2007. By December 2010 jobs were down another 4.1 million to 130.2 million. (1)

The loss of 7.7 million jobs underestimates America’s job needs because the adult civilian population keeps growing. At current population growth America needs 1.7 million new jobs a year to keep up with the increase of the working age population. Like “Alice through the looking glass” America needs all the jobs it can get just to stay in place. Yet the December 2010 job totals are 303 thousand below December 1999. More than a decade of job growth, gone.

Like many democrats President Obama maintains a genial and sympathetic tone toward labor while taking the labor vote for granted and defending poor job news. On January 7th he applauded 103 thousand more jobs reported by the Bureau of Labor Statistics, but failed to mention that 24.5 thousand of the new jobs came at restaurants, along with another 16.1 thousand more jobs at establishments doing amusements, gambling and recreation and 15.9 thousand more jobs in temporary help services.

President Obama and too many others continue to act as though Americans can spend their way into full employment. That policy started with Franklin Roosevelt and continues today. When jobs lag behind we hear proposals for a tax break or two, and the great cry sounds to “get some training” but spending into jobs remains the primary policy.

The president’s plans for more jobs will fail because working Americans no longer earn enough on the job to spend our way to higher employment. To keep ourselves employed we must have steadily rising spending in areas where labor productivity is not growing too fast. America cannot rely on new spending in agriculture, mining, and manufacturing to create jobs since the relentless tide of productivity growth keeps restricting these jobs to a smaller percentage of America’s establishment employment.

Gains in labor productivity in service industries in the 1990’s were enough that jobs in information services like newspapers, broadcasting, phone and the Internet started dropping after 2000, along with other service industry jobs limited by productivity gains. Computer technology increases labor productivity in trade with barcodes, inventory management and Internet sales. Retail and wholesale sales volumes per work hour are up and sometimes at rates comparable to productivity in manufacturing. The expanded use of computers and digital technologies in financial services like banking, lending and insurance limits job growth as Americans slowly shift to a paperless economy and computers replace driving to the bank to exchange paper with a teller.

Jobs in just four sectors of manufacturing, trade, information services and finance have a twenty year record of lower than average growth that guarantees a gradually declining share of America’s jobs. Combined these sectors had 40 percent of establishment employment in 1990, which means they needed 12.1 million more jobs just to maintain 40 percent of jobs in 2010. Instead these jobs declined to just under 4 million to 30.6 percent of establishment jobs, assuring that 16.1 million jobs shifted to other sectors.

As the economy changes a limited number of service sectors have to absorb an ever bigger share of America’s jobs. Health care including social services, primary, secondary and post-secondary education and professional services were the three big gainers from 1990 to 2010. Professional services have jobs in law firms, accounting, architecture, engineering, computer design, management consulting, scientific research, advertising, and veterinary services.

These three sectors have more than two-thirds of percentage job gains from 1990 to 2010. Otherwise it is restaurants, amusements, gambling and recreation, along with temporary help services mentioned above and a few more office and business support services that became replacement jobs for the sectors decimated by higher labor productivity and computer technologies.

The need for more health care, education and professional service jobs to meet America’s job requirements strains our politics and creates ominous signs for the future. Health care relies substantially on government support and funding from taxes, which are taxes and funding many in Congress clamor to cut.

Education relies on local property taxes to fund slightly over 8 million public school jobs, and state funding goes for 2.4 million more education jobs, many at state colleges. Falling home prices and foreclosures threaten local school finance. State budgets are in deficit, which further threatens education jobs. Local public school jobs reached a seasonally adjusted high in September 2008, but lag 160 thousand below their high as of December 2010. Jobs in neighborhood schools are spread out geographically and help maintain a core of jobs in many communities. If these jobs are allowed to decline, other jobs will decline with them.

Professional services reached their highest employment in April 2008, but these jobs remain 363 thousand below their 2008 high. For twenty years these jobs acted as a vital source of career employment for people with college degree skills. Professional jobs are up almost 3 million from 1990 and another 900 thousand since 2000, but there are ominous signs for the future.

Architecture, engineering and related services, computer systems design and related services and management and technical consulting services are the three biggest professional service sub sectors with nearly 50 percent of 2010 jobs, but it is computer based work no longer constrained by borders. More and more of it is moving abroad.

Since 2000 private sector employment is down 2.2 million, a decrease of 1.36 percent of establishment jobs. Government jobs at the local, state and federal level including education are up 1.7 million with a corresponding 1.36 percent increase in the government share. The shift to government occurred even though jobs in health care, private schools and professional services gained in percentage share of America’s jobs from 2000 to 2010. The private sector has not delivered jobs.

In our politics the Democrats promise jobs and fail to deliver, the Republicans promise jobs and fail to deliver, and back and forth. They will continue to fail if they treat jobs as a short term recessionary problem. Jobs are a long term problem. I deliberately reference 1990 and 2010 to emphasize that point. It is time for Americans to accept their long term employment problems and discuss long term solutions.

Note(1) All job and employment number citations are from the Bureau of Labor Statistics, United States Department of Labor, Current Employment Survey. No exceptions.