The jobless recovery continues

By Neil Patrick

If redundancies are slowing and hiring is rising, how come no-one feels much better about the outlook?

There are confusing signals coming out right now around the supposed economic recovery. We know that hiring rates are rising. Incomes and spending are on the up too. We also know that workers are increasingly feeling confident enough to quit jobs they don’t like. This fact alone pushes up the volume of hiring activity. So this part of the situation can be at least partially explained.

An oft-quoted opinion about the persistence of unemployment is that workers don’t have the right skills. If this were true, then we’d expect to see that in some sectors, the numbers of unemployed workers would be dwarfed by the numbers of job openings. Employers would have no choice but to settle for less than ideal candidates and many vacancies would remain unfilled.

So is this the case?

Here’s the breakdown for Feb 2015 by industry sector in the US:

What we can see here is that with just one exception, namely Healthcare and Social Assistance, the number of unemployed workers still massively exceeds the number of job openings.

For example, in construction, the number of unemployed workers exceeds the number of job openings by five and a half times. In the enormous sector of retail, unemployed retail workers exceed job openings by around two to one.

This is a jobless recovery. And the lack of any significant recovery in the US labor participation rate confirms this:

So what is going on? Here’s my hypothesis.

First there is a flight to technology investment over investment in human capital. In the seven or so years since the onset of the Great Recession, technology has made huge strides. The result is that most organisations can today accomplish the same or a greater amount of work with a smaller workforce than they did even just a few years ago.

Second, the globalization of workforces means that many jobs which used to stay firmly in the domestic market are now spreading around the world. And it’s not just a cheap labor argument. I recently had lunch with an entrepreneur friend who told me that almost his entire workforce was now composed of freelancers based the Philippines. Yes it was cheaper than a UK workforce (by about 75%), but critically this wasn’t his main reason for the choice. He was in the business of web content production and he had found that his overseas workers were more diligent, more proactive and had better written English than the people he used to employ in the UK.

Thirdly, endlessly falling marginal costs of production mean that revenues and inflation are acting as a brake on spending levels and wage growth. Both have a negative impact on incomes, spending and government tax receipts.

The forty-thousand dollar question is will business growth and continued recovery result in more jobs for humans being created or will the robots steal them?

The one job sector that's booming

By Neil Patrick

The fastest growing sector isn't tech, it's the black economy...

The other day, I met an old friend I’d not seen for years. Decades in fact.

He’s a talented graphic designer. Naturally we talked about how his career had played out. It turned out that he’d drifted from job to job, but due to health problems had never managed to hold a job down for any great length of time.

To survive he’d taken any casual work he could find. Much of this work was paid for in cash; part of the booming black or ‘underground’ economy.

With so few jobs paying an adequate wage to meet the cost of living, millions of educated and skilled people now exist in an underground economy. In the US alone, this has ballooned to over $2 trillion annually.

Most people struggle to imagine a billion dollars, let alone a trillion. Two trillion dollars is $2,000,000,000,000. To put this in perspective, according to the IMF, the total GDP of the UK is ‘only’ $2.3 trillion…

That's maybe 10 million jobs in the US since the start of the recession

America's underground economy is not new, but since the Great Recession hit, analysts estimate it has more than doubled in size, driven by unemployed or underemployed people desperate to just survive. What other sectors can match that sort of growth?

I estimate this is equivalent to at least 5 million new jobs created in the US since 2008. This is fag packet maths I know, but let's say that of this estimated $1tr growth, each person earned on average $20,000 a year (this is probably much higher than the real figure, so I'm being cautious). That equates to 5 million jobs. If the actual average was $10,000, then we're talking about 10 million jobs...

As a benchmark, one of the fastest growing employment sectors, computer systems design, provides around 1.5m jobs in the US. The BLS forecasts this will be 2.1m  jobs by 2020.

So the underground economy is huge. And it’s not just criminal businesses like drugs, cyber-crime or prostitution. Research shows that a great deal of the black economy exists in completely legal industries such as bars, clubs and restaurants. It’s simply non-criminal work that isn't declared to the government by the employer and/or the employee.

Just as many people have been hard hit by the recession, so too have many businesses. It’s a huge temptation for business owners who in better times would probably run their businesses completely legally. Faced with a stark choice between closing down or slipping into the underground economy, many businesses have chosen the latter. Ironically therefore, whilst a decision to operate in the black economy takes tax out of the treasury, it also saves governments money on welfare payments to people who at least maintain some earned income.

Suddenly, the archetypal figures of the underground economy - the drug dealers and Mafia godfathers, now have a lot more company. Their new 'co-workers' are no longer just other criminals in the conventional sense of the word.

So most of these new participants in the underground economy today are ordinary citizens not evil greedy low-lives. They’re doing anything they can to survive and increasingly, this means taking jobs that pay "under the table" because they simply have no choice.

"It's typical that during recessions people work on the side while collecting unemployment benefits," Bernard Baumohl, chief global economist at the Economic Outlook Group, told The New Yorker.

He went on to say: "...the severity of the recession and the profound weakness of this recovery may mean that a lot more people have entered the underground economy, and have had to stay there longer."

Who works in the underground economy?

Some of the folks who've become trapped in the underground economy have been there for years, such as construction workers, illegal aliens and housekeepers. But it's a mistake to think these are all poorly educated immigrant workers.

The huge job losses caused by the recession have forced more people to switch from well-paid professional jobs to low paid service jobs.

But the biggest contributor to the underground economy in the past few years has been employers increasing their use of freelancers or "independent contractors" - even many who actually work full-time.

The weak U.S. economy has already given businesses plenty of incentives to cut costs by paying workers under the table. But the arrival of Obamacare gave them even more. The rules that demand that employers with 50 or more employees provide health insurance for full-time staff while allowing them to avoid offering plans to part-timers naturally encourages employers to offer more part-time work and less full time work.

"This type of regulation could put more people out of work and into an underground economy," Peter McHenry, an assistant professor of economics, told CNBC.

The underground economy hurts everyone

The rapidly growing amount of unreported wages in the U.S. is costing the nation billions in lost tax revenue. The Internal Revenue Service estimates that the losses from unreported wages have grown from about $385 billion in 2006 to about $500 billion currently.

That means the people who play by the rules are getting a raw deal.

"Those working and not paying the taxes put the burden on those who pay the tax," said David Fiorenza, an economics professor at Villanova University. "Taxes could be lower if the government were able to capture the underground economy instead of raising taxes on those currently paying the various income and payroll taxes."

But even those getting paid under the table don't get an easy ride. They forfeit contributions to Social Security, which will reduce benefits in their retirement years. They also get no healthcare, paid vacation or other benefits.

And they certainly end up with lower pay than those in the rest of the workforce. Government regulations about minimum wages hold no sway at all in the black economy. Ironically this is the most free market sector of all…which means pay is constantly being forced lower.


What the growth of the black economy really means

Whilst very little hard data is available about the underground economy, I am convinced that the majority of people within it are there not because they want to be, but because they have no real alternative.

And its explosive growth means that if you want to work, more and more of the work that is available is within the black economy. It’s Hobson’s choice…no work or work that is officially illegal. It’s not a symptom of an increasingly dishonest population, it’s a symptom of economic policy failure.

Both the IRS in the US and the Inland Revenue in the UK have announced numerous new initiatives to clamp down on the black economy. More investigations; harsher punishments. And yet the non-payment of tax by businesses like Amazon and Google continue more or less unchallenged.

It’s unjust and it targets those who are least able to defend themselves.

Government presents these moves as being a drive for a more equitable society. For everyone to pay their fair share. This is disingenuous. If we had economic success, we’d still have tax evasion, but only by those who had the freedom of choice. Unlike global corporations, most citizens who avoid tax today have few choices left.

I don’t condone tax evasion by anyone. I just think that government needs to remember that it exists to serve its citizens not the other way round. Government is happy to punish people for not declaring income in just the same way as if they robbed a bank. And yet it is failed government economic management that has created the situation that forces most people into these desperate choices.

If forced to choose between your family having nothing to eat or paying your tax bill, what would you do?

Who will take ownership of the jobs crisis?

By Neil Patrick

My recent posts have talked about the impact of technology on jobs. But this is far from the only threat to employment and a jobs recovery in the west. Off-shoring is a major progenitor of the jobs crisis. And the biggest problem with off-shoring is that no-one thinks it's a problem....except those who suffer its consequences and can do nothing about it.

The jobs crisis is real. The World Bank certainly thinks so as you can see here.

The problem is that no-one wants to take ownership of it. Just like the old saying, “Success has many fathers, but failure is an orphan”.

Empires have a habit of crumbling...

Governments have had an easy ride until now. Provide some tax-breaks and incentives to business here, some support for the unemployed there. Survive some rough and tumble with trade union negotiations without too much alienation of the electorate.

None of these things are comparable to the systemic collapse of jobs we now have to deal with in Europe and North America.

Thus, nothing that has gone before has equipped anyone in government with the skills and tools required to solve this problem.

And worse, big business can no longer be relied upon to act as a committed ally in the struggle. Globalization and off-shoring mean that the win-wins that were previously available for governments who acted benignly towards big business have disappeared. Permanently.

And this is why governments must rethink their relationships with big business.

Businesses drive to make the most profit they possibly can. Provided they stay within the law, no holds are barred. That’s the very nature of capitalism and a free market economy.

Big businesses think and act globally. But governments and citizens naturally enough think nationally and locally.

It is this mismatch in scale and geography which is at the heart of the problem.


Offshoring is a genie let out of the bottle

About 35 years ago, western firms started sending low skilled manufacturing work abroad on an ever increasing scale. By the late 1980s this was well established. And it grew. And grew. This mass-migration of jobs was overwhelmingly in one direction: away from rich countries to places where workers with adequate skills were much cheaper.

Shanghai - plenty of jobs here

Whether openly stated or not, lower labour costs were almost always the biggest driver. At first. For many firms, their survival was at stake, since new competitors were undercutting them on price. This usually involved closing plants in America and Europe and moving production to new factories in China, Mexico, Taiwan, Thailand, or Eastern Europe.

The most commonly cited benefits of off-shoring were fourfold:

• For workers in low-cost countries it would provide jobs and rapidly rising standards of living.
• Rich-world workers would be able to leave the dreary work to someone else.
• For consumers, they’d be able to buy goods at much lower prices than if production was onshore.
• For companies, lower labour costs would bring higher profits.

The trouble is that whilst these are all good things in small doses, what happens when the scale of the activity becomes so great that the migration of jobs elsewhere exceeds the ability of the domestic economy to create new ones at home?

Who cares that they can buy a new TV cheaper than ever before, if they cannot even afford to buy food or fuel?



The jobs are never coming back – even Steve Jobs thought so…

Off-shoring from West to East is now a major creator of job losses in rich countries. And not just for the less skilled, it’s now devastating the middle classes too.

US jobs reduction mirrors off-shoring

When Barack Obama joined Silicon Valley’s captains of tech for dinner in California in February 2011, each guest was asked to come with a question for the president.

As Steve Jobs of Apple spoke, Obama interrupted him with a question: “What would it take to make iPhones in the United States?”

Not so very long before, Apple had boasted that all its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold the previous year had been manufactured overseas.

"Why can’t that work come home?" Obama asked.

Jobs’ reply was unambiguous. “Those jobs aren't coming back,” he said.

Jobs' answer revealed the attitude at Apple and most global businesses. It isn’t just that labour is cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories , their flexibility and industrial skills have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most consumer products.



Government thinks big business is its friend…not anymore

Apple is one of the best-known, most admired and most imitated companies on earth. In 2011, it earned over $400,000 in profit per employee, more than Goldman Sachs, Exxon Mobil or Google.

However, what vexes Obama, economists and policy makers is that Apple and many of its high-technology peers are not nearly as committed to creating American jobs as the previous generations of US industrial giants were.

In its early days, Apple didn't look much beyond its own backyard for manufacturing solutions. A few years after Apple began building the Macintosh in 1983, Jobs bragged that it was “a machine that is made in America.”

But by 2004, Apple had largely turned its back on the US and moved to off-shore manufacturing. Central to that decision was Timothy D. Cook, who replaced Jobs as chief executive in August, 2011, six weeks before Jobs’s death. Most other American electronics companies had already gone abroad, and Apple, which at the time was struggling, felt it had to seize any advantage it could find.

In part, Asian manufacturing was attractive because the semiskilled workers there were cheaper. But that wasn’t the main thing that attracted Apple.

For technology companies, the cost of labor is minimal compared with the expense of buying parts and managing supply chains that bring together components and services from hundreds of sources and suppliers. And as automation and AI inexorably increase, so the labour part of the equation becomes even less of a factor.

For Cook, the focus on Asia came down to two things. Factories in Asia can scale up and down faster and Asian supply chains have now surpassed what’s possible in the U.S. The result is that much of America’s manufacturing capacity has become largely obsolete. American manufacturing relative to Asia is now not unlike the Soviet Union was relative to the west in the Cold War era.



How many Apple’s are needed to make one General Motors? 10 actually…

Apple employs 43,000 people in the United States and 20,000 overseas, a small fraction of the over 400,000 American workers at General Motors in the 1950s, or the hundreds of thousands at General Electric in the 1980s.

“Apple’s an example of why it’s so hard to create middle-class jobs in the U.S. now,” said Jared Bernstein, formerly an economic adviser to the White House.

“If it’s the pinnacle of capitalism, we should be worried.”

This used to be US car factory - today, it's a shopping mall

Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s on-site dormitories. Each employee was given a biscuit and a cup of tea and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

Similar stories could be told about almost any electronics company — outsourcing has become common in hundreds of industries, including accounting, legal services, banking, auto manufacturing and pharmaceuticals.



So who wants to own this problem?

Apple’s decisions reveal why the success of some prominent companies has not translated into large numbers of domestic jobs. “Companies once felt an obligation to support American workers, even when it wasn’t the best financial choice,” said Betsey Stevenson, formerly the chief economist at the Labor Department. “That’s disappeared. Profits and efficiency have trumped generosity.”

Companies and other economists think that notion is naïve. Though Americans are among the most educated workers in the world, they say the government has stopped training enough people in the mid-level skills that factories need. Clearly education alone is not enough to solve the problem.

To thrive, companies argue they need to move work where it can generate enough profits to keep paying for innovation. Doing otherwise risks losing even more American jobs over time, as evidenced by the legions of once-proud domestic manufacturers, including GM and others that have shrunk as more nimble competitors have emerged.

“We sell iPhones in over a hundred countries,” a current Apple executive said. “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.”

So business says it's not their problem and government doesn't know how to solve it. And just like two squabbling children, neither will accept any responsibility. Let alone ownership.

And that’s the crux…business will keep on doing what business does, chasing profits. And government will keep on doing what government does…

This may be the biggest problem facing North America and Europe today, but no-one wants to own it.



Some information in this post was taken from this article in the New York Times: LINK

Why the US Middle Class is in danger of extinction

By Neil Patrick

Current news reports claim the US job market is slowly improving. Is this a return to better days? Sadly no. It’s a transformation for sure, but not back to anything like we all knew 10 years or so ago.

Make no mistake about it, America's middle-class jobs have been destroyed in the wake of the 2007-8 financial collapse. The growth in new jobs reported gleefully by the government have been almost entirely low-wage jobs. And there is little reason to believe this situation can be quickly or easily reversed.

What has caused this? In the next few posts, I want to look at the factors that are behind this tragic state of affairs, dig into what’s happening and what we can do about it.

I believe there is no single cause or culprit. Instead it’s a complex cocktail of seven factors which have collided to create a perfect storm for skilled American workers. In brief these are:

• Record levels of government and personal debt 
• The rise of technology leading to ever falling marginal costs 
• Capital shifts away from labour and into non-human investments 
• The globalisation of businesses 
• Government fiscal policies 
• Demographics and education 
• Finite global resources 

But I am getting ahead. In this post, I am going to look at:

• The nature of the alleged jobs “recovery” 
• Why GDP growth isn’t making people better off
• The transference of government debt to households.

The substitution of high paid jobs by low paid jobs is beyond doubt

A recent presentation from the Federal Reserve Bank of San Francisco describes the jobs “recovery” in stark terms. The vast majority of job losses during the recession were in middle-income occupations, and they've largely been replaced by low-wage jobs since 2010:

Mid-wage occupations, made up a staggering 60% of the job losses during the recession. But mid-wage jobs have made up just 22% of the jobs gained during the recovery.

By contrast, low-wage occupations have totally dominated the recovery. They represent 58% of the job gains since 2010. "Many middle-class workers have lost their jobs and, if they have been able to secure new employment at all, find themselves earning far lower wages post-recession," the San Francisco Fed says.

Nearly 40% of the jobs gained since the recovery began - about 1.7 million - have come from three low-wage sectors: food services, retail, and employment services.

And four low-wage occupations are now the top four types of employment in the US: retail sales, cashiers, office clerks, and food preparation and servers:

The problem is compounded by the fact that industries which employ mid-wage earners, such as construction, manufacturing, insurance, real estate and IT, have either stagnated or grown too slowly to recover their pre-recession losses.

Worse again, budget cuts to federal and state government have eliminated a vast swathe of mid- and higher-wage jobs. And a separate chunk of middle-wage jobs including carpenters, plumbers, plasterers and electricians are still waiting for the U.S. housing market to recover.

The growth of wealth inequality is a problem for all, not just the poorest

This is creating a polarised workforce in the United States. Over the past decade, both high- and low-wage jobs have been growing. But jobs in the middle continue to shrink. Mid-wage jobs suffered a major drop after 2001, largely stagnated during the 2000s, and have now declined even further in the most recent downturn.

Economists have been debating the causes of this divergence. Harvard’s Lawrence Katz and Claudia Goldin, argue that new technologies and machines are now displacing mid-wage jobs.

I believe this is a correct analysis as I talked about here. But it’s not the full story. Some others, such as Larry Mishel of the Economic Policy Institute, point to political factors, from the decline of labor unions to trade liberalization to the dwindling minimum wage. This is a factor too, but again it’s only an ingredient in the mix, not the full disastrous recipe.

But neither of these arguments discuss the lead weight which is pulling the whole economy down. And that weight is government debt. That debt puts massive upward pressure on tax, demands endless quantitative easing (devaluation of the dollar to you and me) and limits government spending – the type of spending which would create more jobs in the public sector.

It seems logical to me that there’s no single simple explanation of what’s going on. It’s multi-factorial which makes it complex to understand and remedy both at a national and individual level.

But if the trend continues, it will amplify something which is already a big problem in the United Sates: income inequality. Not to mention the destruction of the hopes and aspirations of a huge swathe of American society. And needless to say, that’s a bad thing…

GDP growth and household incomes have become separated

For the first time in US history, economic growth is no longer driving income improvements at the household level.

Traditionally, improvements in GDP have directly resulted in increased income and prosperity for citizens. In the US, this link has broken. US median household income is now at a lower level than it was in 1999. In fact even though US GDP has been on the rise since 2009, household income has been falling since 2008:

Here we see the evidence of how as technology continues to increase productivity and reduce marginal costs, so we have GDP growth but no wealth creation except for those who are in the boardrooms and/or major equity owners.

To look at it in its simplest terms, businesses can create higher returns with less human labour inputs than ever before. The first industrial revolution substituted human muscle power with mechanical devices. The second industrial revolution transformed transport and communications. And the third industrial revolution is replacing human cognitive tasks with artificial intelligence.

So until recently, technological improvements have only really affected those who sold their manual capacity to earn a living. Today’s technology is reducing the workforce needed for tasks which required the application of professional and mental skills too. But there’s another problem; if we are selling our manual labour, we need to do nothing to create our commodity. Our bodies are there to be applied to work whenever we want. Little or no training is needed.

But jobs requiring the application of skill and knowledge are different. The acquisition of these skills can take years. Sometime decades. And if no-one wants them anymore, we have a stark choice – dump them and start again or try and compete for unskilled work.

So we have an American middle class with skills that fewer and fewer people want or need to pay for. The keys to the acquisition of wealth are no longer the sale of our labour and skill. They are the ownership of income generating assets. And thanks to booming stockmarkets, owning assets has made most of the wealthy even wealthier over the last few years.

This is the reality of the polarisation of America’s workforce. Greater wealth acquisition by those at the top, those who own assets, but falling income levels for everyone else… not just the poorest, but the vast majority of Americans.

Needless to say, this is also a bad thing…

The burden of government debt is being passed to households

Despite multiple deficit-reduction deals during the past three years, the US national debt is projected to swell to 100 percent of the economy by 2038, due primarily to the enormous cost of caring for an aging society.

Whilst WW2 exceeded the current peak of government debt, the end of WW2 and the global restructuring that arose from its ashes is a very different scenario to that we face today. Post 1945 saw the US emerge as the dominant global super power. It’s huge manufacturing capacity, abundant natural resources and global markets created the wealthiest society on the planet:

But post 1980 has seen the failure of that economic model as the production of cheaper goods of equivalent or even higher quality started to materialize in low wage economies.

Making matters worse, tax cuts for the vast majority of Americans were made permanent during last year's fiscal cliff showdown. If the tax cuts had been allowed to expire, projections showed the debt dropping to 52 percent of GDP during the next 25 years.

In effect, huge government debts are being allowed to accumulate unchecked. But sooner or later these debts will be passed to individual citizens rich and poor through the giant levers of fiscal policy.

And you guessed it; this is also a bad thing…

So these three points define the problem: 

• Millions of jobs for skilled workers in the middle income bracket have simply vanished. 
• Economic growth has become of value only to the asset owning classes. 
• Government debt will continue to be passed onto citizens. 

This isn’t a problem which can be solved by the traditional tools of government. If you want to place your faith there, that’s your prerogative and I hope you are right. My take is that we all need to come up with our own personal solution. It might just be the biggest test of our lives…

I’ll be back with more on this soon.

Why "The Unemployed Need Not Apply" Need Not Apply to You

     

By Neil Patrick

Abby Kohut is rather special. Packing up home and commencing a nationwide tour in an RV in 2009, she has embarked on a one woman crusade to teach better job hunting skills to one million people across the US!

Abby Kohut

Her books "Absolutely Abby's 101 Job Search Secrets" and "Absolutely Abby's Top 12 Interview Questions Exposed" reveal the secrets about the job search process that other recruiters won't tell you.

She was a highly successful recruitment director for many years and knows exactly how and why employers hire the people they do. But more than that, she has seen how social media and the internet has revolutionised the skills people need to find jobs in this tough job market. Despite the recession, jobs are still out there, but we need a whole new skill set to find them and get hired.

I completely share Abby’s opinion that the old ways of finding jobs just don’t work anymore. And if the last time you had to find a job was more than two or three years ago, the methods you used then won’t work now.

Like it or not, social media has transformed the processes used by recruiters and hiring organisations and this means we need a whole new set of skills and strategies to get hired.

Abby has presented to over 200 groups and was recently interviewed on Fox News Live, ABC's Good Morning Connecticut, WKTU-FM, WOR-AM, WDVR-FM, and the Joe Franklin show on Bloomberg Radio. Abby was selected as one of the top 100 influential people online according to Fast Company Magazine and was named as one of "The Monster 11 for 2011: Career Experts Who Can Help Your Job Search".

Here’s a recent radio interview in which Abby shares some valuable tips and advice on how you can make best use of social media to help your job search.






I hooked up with Abby several weeks back now and we agreed that since our beliefs were so aligned we should collaborate in our shared mission to help job seekers.

And today, this is my first guest post from Abby. Abby’s post contains some wise words about how we can (and absolutely should) confront the widespread practice of recruiters of excluding job applicants who are currently unemployed. It’s more than simply unfair, it’s a counterproductive practice by employers and damaging to their organisations' reputations in my view.

Moreover, if you are a hiring organisation and you only hire people who are currently employed, I hope this post makes you reconsider if it really makes sense to deliberately exclude candidates just because they happen to be currently unemployed?

Here’s Abby:



By Abby Kohut

Anyone who is currently searching for a job has probably read at least one article about a company who is unwilling to hire "the unemployed." Even more interesting is the article that I recently came across about the backlash from critics against job boards like Monster saying that ads of this kind should be banned from being posted.

As much as it would seem that encouraging job boards to remove these ads might seem like a solution, the better solution is to educate these companies from the top down on why "unemployed" candidates must be evaluated in the same pool as employed candidates. After all, even if all the job boards ban these ads, these companies can still make their own poor decisions during the hiring process.

First, let’s review some of the common reasons why people become unemployed in the first place, shall we?

Stay at home parents or caregivers returning to work – these are typically people who have made a conscious effort to be unemployed. Anyone who has ever fallen into this category realizes that their apparent "unemployment" gap was potentially more challenging than any previous job.

Those who were laid off – these are people whose departments were completely eliminated, whose companies were acquired or simply whose companies were poorly funded. Their lay off had nothing to with their performance and they come equipped with references to prove that. Some of these people were fortunate enough to receive a severance package and decided to enjoy life for a while and live off their severance. Life is precious and sometimes it’s hard to really enjoy it while you are tethered to a demanding job. Can you really blame them?

The terminated – these people are the ones who were let go for poor performance or for personality conflicts and have the most difficult time finding work. Even the unemployed in this group deserve to have an opportunity to contribute, especially if the termination was due to a poor fit between an individual and the job or corporate culture, or clashing management styles.

You – if you currently have a job, imagine for a moment that tomorrow you are informed that your job has been eliminated. Aren’t you a good performer today? A viable member of the work force who deserves to find another opportunity to contribute to society? Does that fact change tomorrow when you get your pick slip?

It is absurd to simply eliminate "unemployed" candidates without understanding why they are unemployed. Unemployment is simply a state that people pass through from one job to another. It is a natural part of life as is "unmarriage." When people get divorced, they don't simply get remarried the next day. They are "unmarried" until they are remarried. Similarly, people who are unemployed are simply between opportunities. For example, how can we as a country possibly expect people at the VP level to find a job within a week, especially if their company’s closing came as a complete shock to them? Most people "forget" to keep networking once they are happily employed so when their company closes, they truly are starting from scratch. Besides, how many VP jobs in their specific industry are out there, not to mention vacant?

Job Seekers In-Transition: If you come across a job ad for a company who is disqualifying the "unemployed", and you actually still want to work for them, here’s what you can do... First, don’t be discouraged - most things that show up in ads and seem like "requirements" have wiggle room for exceptions. In fact, you’ve experienced this many times before. How many times have you seen a requirement on the job posting that you do not have? Has that ever stopped you? OF COURSE NOT!!! Your job is to find the hiring manager or the Department VP or the CEO and to settle the score on why you are the best person for the job. Consider this strategy:



Dear President of RudeRUs, Inc.

I recently discovered an ad for your open "WorkAlot" position on Monster and wanted to introduce myself to you as an ideal candidate. For the past 10 years I was a "WorkAlot" in a similar company who received outstanding performance reviews from all of my supervisors. I have attached a list of references on the following page which I invite you to call. They will tell you that I was a top performer who received recognition year after year for saving the company billions of dollars. My position was eliminated when my employer was acquired. Our doors closed about a year ago today.

You may wonder why I am writing to you instead of applying to your HR department. It's simply because the ad posted by your hiring manager or HR department states that the "unemployed need not apply". Based on my research about your company and your successful career history, it seems like the decision to include this hiring stereotype in your company’s ad could not have been yours, so I wanted to be sure that you could personally make the decision on whether my background would be suitable for your company.

I look forward to having the opportunity to learn more about the position and to eventually joining your company as a "WorkAlot."



Sincerely yours,

John DoesntTakeNoForAnAnswer Doe



For much more about Abby and her amazing work, please visit her website here:

http://www.absolutelyabby.com/home.html

Detroit: a vision of the future?

By Neil Patrick

Not many people know that in the 1950’s Detroit was the fourth largest city in the US.

But almost everyone knows that the city is now bankrupt.

The mainstream media is focused on the crazy legal merry go round that has ensued in the wake of this collapse.

But a city is not really an entity on its own, although bureaucrats may find it more convenient to organize it that way. A city is the sum of all the people and lives it contains. And in the case of Detroit, these lives have been wrecked in varying degrees, not only directly by the bankruptcy, but also by the massive collapse of the government services which resulted from it.

I wonder if in the late 20th century, we had presented people with the reality of the condition of Detroit today, anyone would have taken it seriously? I rather suspect that the majority view would be something like, ‘Oh, that could never happen here’.

But it has and to my mind it presents a terrifying premonition of what the future might look like for many other cities in the US and other western countries. The UK already has what I would call it’s own ‘mini-Detroits’.

The bottom line is that if you worked or are working for any Detroit public organisation, you are unlikely to ever see more than a tiny fraction of your pension rights actually materialize.

But this isn’t just an issue in Detroit.

You may be surprised to discover that 61 other cities in the US have a gap of more than $217bn in unfunded pension liabilities. That's right $217 billion!

And I’d like someone to tell us where that money is going to be found.

You might be tempted to think along the lines of, ‘Oh yes , my city is different, because…’ (add your excuse(s) of choice here). But is it really? Really?

The collapse of Detroit is multi-faceted. Of course it all began with the decline in the fortunes of the US car manufacturing giants based there. And there was corruption, and racial tensions, and a vicious circle of increasing government spending to try and prop things up, delivering worse and worse results, leading to yet more spending. And an exodus of the middle classes, in other words, the ones who contributed the biggest slice of the revenues that government uses to pay for things.

What can we do to protect ourselves from this type of risk to our lives? Well there are three groups of people who are not only unscathed, they are actually doing rather well in Detroit right now.

That’s urban redevelopment bosses, politicians. And lawyers.

Choose your poison.

And if you’re not scared enough already, just watch this to see the full HD version of a really scary movie about the tragedy of Detroit courtesy of Stefan Molyneux at Freedomainradio.com

The invisible threat to all our futures

By Neil Patrick

I started this blog because I am convinced we babyboomers are in a period of unprecedented danger. And not only us, those that depend on us too. Like our kids. And our parents. And because no-one seemed to have any idea what to do about it.

Just about everything we grew up believing about jobs and careers and how our lives would unfold has been swept away in a perfect storm of recession, global economic power shifts, financial crisis, government failure and transformation of the workplace.

Our education in the 1960’s and 70’s was a reflection of a different world. This was a world in which the US and the western economies still held sway. And the education system was geared to providing a workforce which fed that economic machine with the human labour and skills it needed.

Only scraps remain of that world. Just look at Detroit and any other examples of the old world which are now little more than derelict monuments to a bygone era.

As a group, we are extremely poorly equipped to respond to changes of this magnitude. If you have a job, you may consider that all this is irrelevant to you. You may consider yourself lucky. In some ways you are. But do you genuinely believe you will still have a job in five or ten years’ time?

Whatever your answer to the question, the fact is you are almost certainly going to need one.

Today, we have governments that still do not accept that this collapse is irreversible. They cling to electoral manifestos which regardless of policy or position on the political spectrum, argue that their policies are the right ones to restore the situation to something resembling what we all grew up in.

Well, I believe that’s all hogwash. It is never coming back.

The reason politicians tell us that they know what to do to restore the old world order, is simply because saying anything else would make them unelectable.

Moreover, there is a cosy alliance in place between government and big business which maintains a status quo and is a perfect mechanism for protecting the personal interests of the political and business elites.

We are actually partly to blame for this. We abdicated our responsibilities wholesale to our governments many years ago. We put our faith and trust in them. You want education for your kids? Fine we’ll provide that. You want defence against real or imagined enemies? Fine, we’ll protect you. You want doctors and hospitals? No problem. Free education for your kids? Check. You want care for the elderly, and roads and railways and waste removal and a justice system and food hygene and pensions? Don’t worry, we give you all of these. The list is endless.

And that’s the problem. Because every government has attempted to provide all these things to ensure it retains or attains power, we have asked for and they have accepted a magnitude of tasks which they are almost bound to fail to deliver. Not only that, we have to pay for it.

So on the one hand we have an almost endless and growing list of government service obligations to citizens. On the other, we have to figure out how we can pay for this. And yup, you’ve guessed it. We can’t. The money (or more specifically, the credit) has run out. You can only borrow and tax so much before you reach breaking point.

And if your economy isn’t growing, your tax receipts are falling. But you’ve still got to pay for all those promises you made to the electorate.

That’s why the promise has become impossible for governments to keep. The promise was predicated on the belief that western business and economic growth could continue to outpace the rest of the world.

Western governments have dug themselves so deeply into debt that no amount of economic improvement will get us back to where we all want to be.

Yesterday I was sent a viewpoint from someone who I won’t name, but who has had many dealings with the political elites, which I think sums up perfectly the hidden nature of the forces at work in government – and underpins my belief of one of the key reasons we cannot expect to see significant change if we look to politicians (of ANY party) to be our saviours.

The tone is heavily ironic and talks about the UK system, but is broadly relevant to the governments of all western economies, so read with that in mind.

Why do we need a new political philosophy when we already have a perfectly good one? The trouble is that people don’t understand it so let me explain.

We have a democracy. This means that we choose from among a small cadre of hereditary leaders who select a head from amongst themselves. They are in a unique position to do this: they have been trained from secondary school (usually but not only Eton) to understand their entitlement. They are then trained at university (usually Oxford or Cambridge) how to exercise it, for the most part on Politics, Philosophy and Economics (PPE) courses.

They understand as none of the rest of us do that political leadership has nothing to do with purpose other than itself and nothing to do with us. They are not interested and, more to the point, experience has taught them that for a relatively small outlay in highly skilled lying we can be conned into anything. And if the worst comes to the worse they can find scapegoats for us to blame for any consequences that fall upon us. The workshy are blamed for unemployment, the homeless for shortage of housing, the poor for poverty, immigrants for almost everything.

They are pragmatists above all. They recognise that real power in the world lies with money and globally organised money in particular. So they look after the interests of “business” which really means very big business and finance. In return business looks after them. The price is very high: the lies with which to justify the upward distribution of power and wealth become increasingly transparent but it is not a real problem. We must after all select from among their number if we can be bothered to engage in the process at all.

So there you have it. A perfect system already exists. To oppose it creates the danger of instability which makes you a terrorist. Relax and enjoy.

You may think that what I have said so far is unduly cynical and pessimistic nonsense. You may even think it smacks of paranoia. After all I have presented no facts to support my opinion. Worse I have presented no practical alternative. Without facts and a real alternative, how plausible is my argument?

Those criticisms are all fair and reasonable. And that’s why I’ll be returning with more on this topic over the coming weeks.

For now though, I’ll just leave you with this question. Do you sincerely believe your government, or its opponents, really have a realistic chance of delivering anything resembling the sort of lifestyle we all grew up expecting over the next 20-40 years?

Why you are unemployed

By Neil Patrick

This morning, I have been catching up with Stefan Molyneux. In case you don’t know him, he is the host of Freedomain Radio, which is billed as ‘the most popular philosophy show in the world’.

Here is part 2 of his series of broadcasts, entitled, ‘Why you are unemployed’.

If you are unemployed, you may not care very much why, just what you can do to change it. So, if this is how you feel, I’ll save you wasting your time and suggest you don’t watch the film below (or even bother to read the rest of this post). There are no solutions or tips here about how you can change your situation. I've posted plenty of more practical advice about this elsewhere on this blog.

But if you want to get some thought provoking ideas about why jobs are getting scarcer and why the US is struggling to create well paid jobs, there are answers, or at the very least hypotheses to be found here.

And these are not the usual suspects like greed and corruption. Or QE and state subsidies of banks. Or even the damaging effects of low cost overseas labor. Stefan makes the point and it’s persuasive I think, that greed and corruption have always been part of human behaviour and they are no more prevalent today than they were in previous generations when professional working people in the US could expect a much better standard of living. It seems fair to assume that something else is at work today.

Stefan Molyneux
 Credit: Frank Licorice

I certainly agree with him that the idea that we live in freedom is a complete myth. If we were truly free, would we be sent to jail if we didn't pay our taxes? If we were free, would we be forced to adhere to the endless rules that our governments impose upon every aspect of the lives of honest hard working people?

Stefan has been described as an anarcho-capitalist philosopher. This means that he supports the free market as the best way of efficiently (and fairly) distributing wealth throughout society. The anarcho bit relates to his beliefs that state interventions in people’s live should be minimized and that the roots of all our problems today lie in over-extended state power and its endless appetite to extract wealth from citizens in the form of taxation and control. He sees this as a vicious circle that has got completely out of hand. He believes that our governments in the US and the west in general have become defacto fascist empires. And like all empires, they exert control and protect their power through the exertion of violence. Not necessarily bloody violence within their borders, but repression nevertheless in the form of taxes, coercion and the threat of imprisonment.

So watching this won’t help you get a job. It might though give you some new ideas about WHY you can’t get one and help you appreciate why it really isn't your fault.

Stefan claims that philosophers are not interested in supporting any political position. That they are only interested in finding the truth. I’ll let you decide for yourself whether or not you think THIS is the truth.

Why US jobs data is meaningless - well just plain wrong actually

By Matthew O’Brien

The real legacy of the Lehman collapse wasn't an economic meltdown. (That would have happened anyway.) It was three years of wrong information about the economy.

You know something is really boring when economists say it is. That's what I thought to myself when the economists at the Brookings Institution's Panel on Economic Activity said only the "serious" ones would stick around for the last paper on seasonal adjustmentzzzzzzz...

... but a funny thing happened on the way to catching up on sleep. It turns out seasonal adjustments are really interesting! They explain why, ever since Lehmangeddon, the economy has looked like it's speeding up in the winter and slowing down in the summer.

In other words, everything you've read about "Recovery Winter" the past few winters has just been a statistical artifact of naïve seasonal adjustments. Oops.

Okay, but what are seasonal adjustments, and how do they work? Well, you know the jobs number we obsess over every month? It's cooked, in a way -- but not how Jack Welch thinks. For example, the economy didn't really add 169,000 jobs in August. It added 378,000 jobs. But that 378,000 number doesn't tell us too much. See, the economy pretty predictably adds more jobs during some months more than others.

Things like warmer weather (which helps construction), summer break, and holiday shopping create these annual up-and-downs. So to give us an idea of how good or bad each month actually is, the Bureau of Labor Statistics adjusts for how many jobs we would expect at that time of year. This doesn't change how many jobs we think have gotten created over the course of the year; it changes how many jobs we think have gotten created each month of the year.

You can see how that smooths out the data in the chart below from Johns Hopkins professor Jonathan Wright's Brookings paper. It compares the adjusted (blue) and unadjusted (red) numbers for total employment going back to 1990.

But there's a problem. The BLS only looks at the past 3 years to figure out what a "typical" September (or October or November, etc.) looks like. So, if there's, say, a once-in-three-generations financial crisis in the fall, it could throw off the seasonal adjustments for quite a while. Which is, of course, exactly what happened. The BLS's model didn't know about Lehman. It only knew about the calendar. So it saw all the layoffs in late 2008 and early 2009, and interpreted them the only way it knew how: as seasonality, not a shadow banking run.

And that messed things up for years. Because the BLS's model thought the job losses from the financial crisis were just from winter, it thought those kind of job losses would happen every winter. And, like any good seasonal model, it tried to smooth them out. So it added jobs it shouldn't have to future winters to make up for what it expected would be big seasonal job losses. And it subtracted jobs it shouldn't have from the summer to do so. You can see Wright's estimate of just how much this changed the monthly jobs in the chart below, which I've annotated with when the Fed stopped and started its unconventional policies. Notice a pattern?

The Fed has stepped on the gas when seasonal adjustments have made the recovery look weaker than it actually was. And the Fed has stepped off the gas when seasonal adjustments have made the recovery look stronger than it actually was. Now, this is certainly suggestive, but it's not dispositive. As Wright points out, Fed economists are aware of Lehman's seasonal distortions: it's why they changed their seasonal adjustments for calculating industrial production.

But there is still a question how aware the policymakers on the Federal Open Market Committee are of this. Indeed, St. Louis Fed president James Bullard said one reason they didn't taper their bond purchases in September was weak data -- and that "sometimes the jobs report can change the whole contour of how the [FOMC] look at the data." (Though, to be fair, House Republicans threatening to blow up the world economy again was probably a bigger reason for the no-taper). In other words, bad data might be influencing the Fed's bad stop-start policy.

Just how bad are the data? Well, keep in mind that the jobs report's margin of error is supposed to be about 90,000. But these post-crisis seasonal errors have almost doubled it to about 170,000. That's right: the jobs report's real margin of error has been about as big as the average jobs report itself the past few years. 

Now, the one bit of good news here is this effect has already faded away for the most part. Remember, the BLS only looks back at the past 3 years of data when it comes up with its seasonal adjustments -- so the Lehman panic has fallen out of the sample.

Here are two words we should retire: Recovery Winter. It was never a thing. The economy wasn't actually accelerating when the days got shorter, nor was it decelerating when the days got longer. It was mostly growing at the same, kind-of-miserable pace. 

Of course, we journalists (myself included) scrambled to explain what turned out to be a spurious trend: it was the pentup demand for housing or cars or ... something that had the economy looking up every winter. Eventually some Wall Street firms, and journalists like Cardiff Garcia of FT Alphaville, began to suspect something was screwy with the seasonals. But in the meantime, everyone else showed off our infinite capacity for rationalization. There's always a story you can tell, and we certainly told them. After all, stories are more interesting than disclaimers about margins of error and seasonal adjustments.

Now, seasonal adjustments might not sound sexy, but there's nothing sexier than getting the jobs numbers right. They matter for the Fed. They matter for markets. And they matter for our own understanding of the economy.

The BLS can, and should, do better.

This post originally appeared here:

http://www.theatlantic.com/business/archive/2013/09/how-bad-data-warped-everything-we-thought-we-knew-about-the-jobs-recovery/279923/

The Fed keeps the insane party going and why this is bad news for (nearly) all of us

By Neil Patrick

Investors have been stressing since the spring about the autumn prospect of Ben Bernanke printing just a few dollars less than before. Whole economies, like India, have wobbled before the threat that the Fed might print ‘just’ $75bn a month instead of $85bn.

And just as they were getting used to the idea, he goes and bails out at the last minute. This astonished almost everyone.What is going on?

Is this what Bernanke wants to leave behind?

I don’t wish to sound smug, but I wasn't as surprised as some people by this latest Fed stunt.

Why? Well primarily because the U.S. economy remains so weak that there are serious risks in actually initiating this move. Of course, the time must come when the Fed will begin to reduce its dollar printing. It seemed fair to assume that with all the advance warnings, the markets had already priced it in. And so I suspected the Fed might be much less aggressive than almost everyone anticipated.

But you can easily argue that the financial markets have become so accustomed to the Fed’s easy money policy that the quantitative easing (QE) addiction is now seriously ingrained. In other words, the stock market has consumed so much booze that the hangover will be so severe that it’s really preferable (not to say easier) to stay drunk.

However, I did think they would at least do something. After all, the market has been given so long to get used to this idea.

If the Fed actually ever intends to stop printing money, now looked a good time to make at least a small gesture in that direction. Even a 'tiny' reduction of $5bn would not have upset the markets too much, and would start getting them used to a slightly more sober environment with just a little less QE.

But no. Even with US stock markets at a record high, $5bn was too much for Bernanke. The Fed will keep printing $85bn a month…for now. And there’s no obvious prospect of this changing before the end of the year.

Markets were both stunned and cheered. Hurrah…even more free money! Gold soared. Emerging markets jumped, developed markets too. Pretty much everything jumped except the US dollar.

The Fed provided a few excuses for its inaction. It doesn't like the fact that bond yields have jumped so quickly in recent months. It’s worried about the impact of this on the housing recovery. And there’s also the threat of another big crisis over government spending, as the debt ceiling hovers ever closer.

As Paul Ashworth of Capital Economics pointed out, the Fed is probably “also increasingly concerned… that Congress could trigger a Federal shutdown within the next month.”

But if Ben’s really worried about the politicians not getting their fingers out to try and agree on something, then he should take away the security blanket of less QE. As Heidi Moore noted yesterday, he should “force the economy, the markets and Congress to think for themselves.”

So it’s all a load of shabby excuses. If this proves anything, it’s that Ben Bernanke doesn’t want to be remembered as the man who pulled the plug on the recovery too early, plunging the US into the Great Depression of the 2010s.

I guess he’d rather risk being remembered as the guy who acted too late to prevent the Hyperinflationary Collapse of the 2020s…

So what can we expect to see now?

It seems reasonable to assume from this that when it eventually happens, the actual process of tapering will be slow and gradual with the goal of minimizing any potential market disruptions.

But this is exactly where the difficulty lies. After all, everyone knows that the Fed cannot continue expanding the money supply at the current rate. Therefore, the challenge is how to taper with the least amount of market disruption.

I suspect this will include an increase in market ‘signals’ from the Fed to gauge the market’s reaction to various possible Fed actions and having contingency plans in place to try to control any unforeseen reactions and consequences which arise.

Tapering will mean higher interest rates

Most believe that tapering will result in an increase in interest rates, especially at the higher risk end of the market (like your mortgage, especially if it’s large or your earnings and credit history are anything less than dazzling). So, in this scenario, the housing market recovery could be stopped dead in its tracks.

Some claim that the delay on the part of the Fed may be politically motivated as it helps the Democrats by keeping interest rates low. Only a few people actually know the truth. The rest of us are left to speculate.

So, if the Fed does eventually get around to tapering, interest rates rise, the housing market recovery stalls, and the federal government deficit and debt spike, at election time, the Republicans will surely have all fingers pointed at the Democrats.

However, since the Republicans couldn't pull off victory in the last presidential election when the unemployment rate was at 8.2%, and given that Obama was the first incumbent in the modern era to be re-elected when the unemployment rate was above 8.0%, I’m not convinced that the Republicans would automatically benefit.

But the fact remains that higher interest rates will hurt everyone. Everyone that is except investors who rely on interest income.


So what does all this mean for most of us?

Even when the Fed does eventually begin to taper, I think they will remain “highly accommodative.” In other words, they will not raise short-term interest rates sharply for quite some time. Recently, when the Fed merely hinted that they might begin to taper, stocks sold off sharply.

So when will the Fed begin to taper? Some say December, but that’s during the holiday season, a period when the economy typically sees a brief uplift. This seasonality makes it difficult to determine if the economy is really healing or just experiencing a Christmas boost. Therefore, even though it’s possible the Fed will taper later this year, I don’t believe they will until at least 2014.

Despite the fact that many U.S. stock markets are reaching record highs, investors need to have a plan in place to protect themselves against a very possible and very nasty collapse. We are a long way from being out of the woods yet. In the interim, with GDP under 2.0%, stock values are continuing with their unwarranted inflation and I think the prospect of a severe correction in equity values just keeps on getting more and more frightening.

So investors need to keep a sharp eye on their assets and protect them against the very real threat of a severe market correction. Keep in mind that at some point, the Fed must take away the punch bowl, the party will end, and the probability of a collapse in not just stock values but other asset classes too is high. Really high.



What does this mean for investments, jobs and your financial future?

If you are an investor, hold your course. If you were happy with what you were doing before the 'vapor taper', you’ll be fairly pleased this week – almost everything you own has gone up in value (for now). Cheap Eurozone stocks still look good, Japan is still doing the business, and if you still have any, you should hang on to gold, specifically as a hedge against the real risk of systemic collapse which hasn't retreated from view.

But I wouldn't expect an easy ride in the coming months. Once the delusional euphoria of ‘QE forever’ wears off, there are going to be a lot of confused investors in the markets. As Eric Green at TD Securities told the FT: “The Fed had the market precisely where it needed to be.” This delay ” “ultimately makes that first step in the tapering process harder to achieve.(My emphasis)

It also puts a lot of pressure on Mark Carney at the Bank of England. On the one hand, Mr Carney will be pleased. The Fed’s 'vapor taper' might take some of the pressure off global interest rates in the short term. On the other hand, the slump in the dollar has pushed sterling higher. Carney won’t be too happy about that.

Anyway, what does this all mean for the outlook for most of us? Not investors with big investment portfolios but people with normal jobs and normal financial commitments. You probably know what I’m going to say.

The impact of this for business and hence jobs is hardly encouraging. The outlook for federal sector employment remains bleak and only confident growth in the private sector can offset this. But whilst share prices continue to inflate, significant GDP growth and business confidence remain elusive. So while growth in earnings remains subdued, employers will remain cautious about increasing workforce overheads.

We are likely to see a continued expansion of all the things employees dread like short term contracts, outsourcing, cut backs on management and support teams, in other words, growth in low paid, short term jobs, but contraction of secure, well paid jobs.

So we can all expect our basic costs of living to keep on rising at a scary rate amidst a really tough job market. And as I've talked about previously, slashing our outgoings, reducing our borrowings and increasing our income level through the acquisition of income generating assets is now more important than ever.

The crazy Fed party will end soon hopefully with a whimper not a bang.

USA: The jobs crisis carries on and our ‘leaders’ have no solutions

By Neil Patrick

I get really cross when I read pronouncements from regulators and bankers about the recession. The members of both groups are securely cosseted from actually feeling any of the real effects themselves. And each blames the other for the crisis. Regulators blame poor bank governance, bankers cite excessive and disruptive government interventions.

I believe both are right actually. It’s not rocket science to work out that these are not mutually exclusive. One does not preclude the other.

It’s actually a rather cosy mutual support mechanism, enabling each to pass responsibility to the other, whilst happily continuing to pursue their own self-interest.

But we need to look forwards not just backwards to restore growth to the US.

On Sunday, the former Federal Reserve Vice Chair, Roger Ferguson admitted the US economy is still suffering "lingering effects" from the financial crisis. Growth he said was too "modest" to bring down unemployment or increase labor force participation at a satisfactory pace.

(Well said Roger; we hadn’t actually noticed that).


We need to remind you who the bad people are (and that’s not us).

Of course, Ferguson did not offer any monetary or fiscal policy prescriptions for accelerating economic growth as he accepted the National Association for Business Economics' annual Adam Smith Award. Instead, he focused on the need to restore public trust in the financial sector and to improve corporate governance.

(That’s right Roger, this recession has nothing to do with out of control government debt, it’s those greedy heartless bankers we need to blame).

Ferguson has been mentioned as a possible successor to Ben Bernanke. Currently president and CEO of financial services firm TIAA-CREF, Ferguson told the NABE's annual meeting "we have continued on a path of modest growth in the U.S., and while we all would wish for more, it is a far better scenario than we might have imagined five years ago today."

(That’s really great news Roger, thanks).


Of course we cannot risk upsetting the (massively overvalued) equities markets…

He also said the "still-modest growth" pace - 2.5% in the second quarter but less than 2% so far in the third quarter - should not be viewed as acceptable. He said, “it serves as a reminder that today, five years on from some of the darkest days of the financial crisis, we continue to deal with its lingering effects."

"The unemployment rate remains stubbornly high and labor force participation low. The markets have been volatile in the face of concerns about the Fed's tapering plans."


…much better to continue devaluing the dollar

Although he mentioned concerns about the Fed "tapering" its large-scale asset purchases, Ferguson did not say how he thinks the Fed should proceed in scaling back its $85 billion a month in "quantitative easing" or how monetary policy could be applied to stimulate growth.

Rather, he said "it would be wise to turn our collective energies to ensuring that we never have to endure a crisis like that again."

(That’s right Roger, we need lots more regulation to ensure we only get the right sort of growth).


And the solution is…lots more regulation

Although reams of financial service regulations have been implemented in connection with the Dodd-Franks Act, with more to come, Ferguson said "they are not enough."

(No that’s right Roger, our financial institutions need lots more government bureaucracy to make sure they cannot ever again become a burden to the government but only fill the government coffers with lots of ‘good’ money).

"It's equally important to further improve corporate governance at financial firms," he said. "We need stronger and more effective corporate governance approaches, particularly at the institutions that have been deemed systemically important.

The need for better "governance" in the financial services industry is underscored by what he called "a widespread lack of trust" in financial firms and by Americans' "angst" over their retirement prospects.

(Erm…isn’t that the same lack of trust that people have for politicians and regulators Roger?)

Ferguson said "it's vital that Americans regain trust in the financial services industry, because the industry is simply too important to our economy and our global competitiveness to be looked on so warily by so many people."

In saying "weak corporate governance" lay at the root of the financial crisis, Ferguson was referring to, among other things, commercial banks' increased "involvement in risky trading activities; growth in securitized credit; increased leverage; failure of banks to manage financial risks; inadequate capital buffers, and a misplaced reliance on complex math and credit ratings in assessing risk."

(I accept these are huge failings, but if you constantly point them out to the media, how will that help restore the much needed trust you talk about?).


We’ll tell you how to run your business

Ferguson highlighted recommendations of the Group of 30, an international forum of public- and private-sector financial leaders of which he is a member:

"First, we urge boards to take a long-term view that encourages long-term value creation in the interest of shareholders ... "Second, we urge management to model the right kind of behavior and to support a culture that promotes long-term thinking, discipline, sound risk management, and accountability ...

"Third, we urge regulators and supervisors to take a broader view of their roles, one that includes understanding the overall business, strategy, people, and culture of the firms they oversee ...

(Well said Roger…even though this is the only new and constructive thing I’ve heard you say).

"And finally, we urge long-term shareholders to use their influence to keep companies honest about performance and focused on improving governance."


I apologise for my mockery of Mr Ferguson,but…

Actually I am being hard on Mr Ferguson here. But he's more than big enough to take it I think and he's the one winning the awards not me. I think most of the things he describes are good aspirations. But great vision is one thing, effective execution is totally another. And little of the above actually helps solve the problem that is slowly killing the US every day it continues.

We need at least as much focus on driving an equitable recovery and household income growth as we do on looking backwards and learning the lessons of the past. And that means a really constructive dialogue between government and business, not just a witch hunt and lots more regulators and rules.

Why it's a LIE that olders workers are taking jobs from the young (pt2)

By Neil Patrick

This morning I was disappointed to read the article below from the Denver Post which promotes the notion that work opportunities for the young are being ‘stolen’ by older workers in Colorado.

Titled misleadingly, ‘Youths hit hard as older workers claim most new jobs’, the Denver Post article claims to show that mature workers are ‘stealing’ the job opportunities from the young. It even includes an apparently persuasive graph to 'prove' the point.

Of course this is all nonsense and I've provided the full transcript below for you to judge for yourself.

Granted, it’s a pleasingly convenient idea to grab when you look at the graph below, but as with so many news stories, it doesn’t actually tell the whole truth.

In fact it even contradicts the some of the key findings of the Report it cites, the Express Employment Professionals' white paper. This paper stated that, ‘The first Boomers turned 60 in 2006, so no one is surprised that they’re retiring. The size of this generation, which comprises 26.4 percent of the population and makes up the largest percentage of the workforce in the U.S. at 38 percent, is producing an increase in the retirement rate, impacting the labor force simultaneously”.

So it is clear that because of the large size of the baby boomer group, retirements in the US are actually increasing. If this is true, how can they also be taking jobs from the young? How can we reconcile these apparent contradictions?

Actually when we dig a little deeper, it’s not too hard to find the truth:

1. The fall in the level of workforce participation by the young can be directly attributed to increased numbers staying in education, the increase in those that have given up looking for work and the fact that many are choosing to stay at home, eased by ‘subsidies’ by their parents and others. To quote the Express Employment Report directly, “There are an estimated 1.8 million young adults who are not in the labor force because they have given up on job hunting for the time being”.
2. The article identifies two ‘outcomes’ i.e. the stable rate of labor force participation by older workers and the falling rate of employment amongst the young and assumes that the former is causing the latter. This isn't a causal relationship - one has not caused the other, so it is inaccurate to state that ‘older workers are claiming most new jobs’. 
3. The data is based on LFPR (Labor Force Participation Rate). This has absolutely nothing to do with job hirings. It is simply a measure of the proportion of people within a given group that are in paid employment. The LFPR for a group can rise or fall without anyone changing their job, simply by the number of people in that group changing for any reason e.g. retirement or emigration. 
4. Similarly, the growth in employment numbers for any given group doesn't equate to new jobs being filled; it has as much or more to do with the numbers that actually do not leave employment as it does with those that gain it. So for example if the numbers in employment increase in any given period, this number is the result of the net outcome of people joining and leaving the workforce. It does not equate to new jobs being filled.

So what is actually happening is that mature workers’ labor force participation is being stabilized by a balancing between a shrinkage of the group due to increasing numbers of retirees and others working longer and delaying retirement. Meanwhile, the LFPR by the young is falling due to low growth in the parts of economy generating jobs for which the young are qualified and a growth in those who are either staying in education or have given up looking for work.

Hardly the same story as the headline is it? And it’s the sort of sensationalist argument promoting inter-generational resentment that we don't need. Neither does it highlight the real issues which are nothing to do with age and everything to do with restoring real growth to the US economy.

Anyway, here’s the full story as it appeared in the Denver Post last weekend.

Youths hit hard as older workers claim most new jobs

By Aldo Svaldi The Denver Post


Welcome to the brave new labor force, where the young struggle to find a job, the old delay retirement and a shrinking share of the population is working.

"We have an actively disengaged portion of the population, and the implications are far reaching," said David Lewis, an executive with Express Employment Professionals, which put out a white paper on the topic last week.

Back in 2000, nearly half of 16- to 19-year-olds were employed in Colorado, and eight in 10 of those age 20 to 24 worked. But in 2012, fewer than three in 10 teenagers were employed and only 64.2 percent of those in their early 20s, according to the U.S. Bureau of Labor Statistics.

At the other end of the demographic curve, employment among 55- to 64-year-olds in the state went from 60.8 percent employment to 64.8 percent over the same period. Among those 65 and older, it went from about 12 percent to 18.8 percent in 2012.

Since employment levels bottomed out in December 2009, workers age 55 and older have claimed nearly three out of four new jobs created in the U.S., according to the Center for Economic and Policy Research.

They were claiming about 84 percent of the jobs created in the 12 months through April, the center reports.

A look at unemployment rates disproves the myth that older workers were hit hardest by the recession, said Alexandra Hall, the state's chief labor economist.

Those age 55 to 64 in Colorado had a 6.8 percent unemployment rate last year. The unemployment rate among teenagers was at 26.2 percent.

The greater participation of older workers, including those past traditional retirement age, bucks the overall trend of fewer people working or looking for work with each passing year.

"Overall labor force participation rates will continue to decline as they have since 2000, through 2040," forecasts Cindy DeGroen, the state's director of population and economic forecasting.

People on either end of the age curve have more options when it comes to not working, which is why those groups are seeing some of the biggest shifts, Hall said.

One key explanation for fewer young adults working is that more of them are going to college, which is a positive for the economy, she said.

But even those with four-year college degrees are increasingly finding themselves underemployed, said futurist Tom Frey, executive director of the DaVinci Institute in Louisville.

About half of college graduates last year are holding jobs that don't require a degree, and about 35 percent are trying to start their own businesses, he said.

Some of the decline in youth employment is tied to a lack of opportunities, as older workers take jobs that traditionally would have gone to younger workers.

Some of it is also generational. Millennials, those age 18 to 30, are more optimistic than their elders about their employability, despite the difficult economy.

About 62 percent are confident of the possibility of a career, making them much less willing to settle for a "job," according to survey released Thursday by employment search provider Monster Worldwide.

"They believe they are worth more than the market does, especially if they graduate with a liberal-arts degree," Lewis said.

Lewis said that a third of millennials were raised by single parents, and many have tight familial bonds, making them less willing to move for an opportunity and more comfortable living at home.

Hall said the labor statistics show young adults, despite getting a later start, increasingly join the ranks of the employed by age 25 and beyond. The employment rate in Colorado among those age 25 to 34 is 78.3 percent.

But delayed entry into the workforce carries a cost, especially when it comes to developing what labor experts refer to as the soft skills, things like dependability, problem solving, professionalism and the ability to communicate with co-workers.

"They are getting older, but they are not very skilled because they haven't had a chance to work," Frey said.

At the other extreme are baby boomers, those born between 1946 and 1964, who find themselves, either by choice or necessity, working far longer than previous generations.

"You need more money to support a longer life span," DeGroen said of the group that has been called the healthiest and wealthiest generation.

Two severe bear markets in equities and one in real estate, not to mention low interest rates, have prevented many baby boomers from building the nest eggs they needed to retire.

Retirees over age 65 in Colorado are replacing, on average, about 56.5 percent of their pre-retirement income instead of the 70 percent that financial advisers recommend, according to astudy from Interest.com.

And a growing number of seniors in the country, about 338,000 of those over age 60, have financial responsibility for their grandchildren, according to the U.S. Census Bureau.

Still, even at 20 percent, the share of those 65 and older employed is only a fourth of the level seen among "prime age" workers, those from age 25 to 54.

Given that they can't work forever, one unknown is whether the accelerating departure of the baby boomers from the workforce will create opportunities for young adults.

"As employers have more demand for labor and bid up what they are willing to pay, workers will come into the workforce," Hall said.

Economist Lawrence Mishel, at the Economic Policy Institute, argues that the federal government should create a temporary five-year program to allow retirement at age 60 and above.

"Get them out of the way and let younger people have jobs," he said.

Colorado, which has one of the highest concentrations of baby boomers of any state, will see the number of residents over age 65 triple between 2000 and 2030, according to the state demographer's office.

But there are those who argue that demographics aren't the key factor. Labor markets are undergoing a fundamental shift that is changing the very definition of work and a job.

"We are becoming much more a free-agent and freelance society," said Frey.

The overhead costs for a full-time employee now average $10,000 a person, and employers remain reluctant to add to their workforce, he said.

Young adults simply have no choice but to become more entrepreneurial and flexible in how they make their living, he said.



http://www.denverpost.com/business/ci_23986720/youths-hit-hard-older-workers-claim-most-new