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

Is this career suicide?

By Neil Patrick

We hear so much about the explosion of social media and how it’s changing the world, that it’s easy to think that everyone is involved.

Think again.

Naturally enough I whenever I meet my close personal friends, we inevitably discuss how their work is going. If I think about these guys, all of whom I've known for years (okay, decades) and who are all switched on, well educated professionals, I am constantly perplexed by the fact that they just don’t get social media at all.

I should start by saying that this is a very small and skewed sample. All of them are aged 50ish, and employed. They are all male and they all work in the UK. So this isn't in any way reliable research ‘data’. But they are a good sample of the type of people I am trying to help with this blog.

One is a lawyer, another is a mental health worker, one is a CEO, one is a senior civil servant, one is an accountant, and another works for a medical equipment company. Six middle-aged guys all accomplished professionals in their fields.

Every one of them depends on their job for all or nearly all their income. Sure, some have working partners, but in no case does their partner’s income exceed their own.

Firstly, none of them use Facebook. I actually think that’s fine. I don’t use it either simply because I consider it to be more or less irrelevant to my career interests. You may have a different opinion about Facebook, but essentially I consider it a low priority because I think it is really a platform for friends and family relationships, not professional ones.

LinkedIn is of course the only really serious social media site for professional networking. Of these six friends, only one has more than 500 LinkedIn connections and a 100% complete profile. Two have no LinkedIn profile at all. The other three all have fewer than 100 connections and don’t even have a photo on their profile. They very rarely even look at LinkedIn.

Moving on to Twitter, not one of them has a Twitter account. And you’ll not be surprised either that none of them has a blog.

So these guys are all pretty much not participating in the social media revolution. Even my friend who has over 500 LinkedIn connections is what I call a ‘passive’ user. His use of LinkedIn is really more or less just as a self-updating address book.

So what are the reasons for their decision to not participate?

The most common one, is, “I just don’t have the time for that”. The second is that they cannot see how it can possibly be of value to them. The third is that they generally have no idea of how they can leverage the power of social media.

But slowly (very slowly) they are waking up. What I have found in recent months is that more and more of them have moved on from their default position of the last few years, which was, “that’s a waste of time” and, “I’ve got better things to do”, to “Yes, I know it’s important, but I really don’t know what to do”.

So they are showing signs of acceptance of the way things have changed, but remain in denial, having changed their excuse from, “It’s not important”, to “I don’t know how to do it”.

I find I am having more and more discussions with them about how to leverage their LinkedIn profiles. But mostly, they are carrying on as before, making huge assumptions about how they ought to use social media, and generally getting it wrong in the process.

One of them recently lost his job in a reorganization. He was one of the guys that had no LinkedIn profile at all. Naturally I am doing all I can to help him recover from this situation. But I am sorry to report we have no good news yet.

Can I say that if he’d had a LinkedIn profile he’d not be in this situation? No, that would be naïve. It wouldn't have prevented him losing his job. And it wouldn't guarantee that he would find another one completely effortlessly.

But I am sure that if he had developed a strong personal online brand, a global network of relevant business contacts and a position as a go-to expert in his field, he’d have infinitely better prospects than he has right now.

I actually do consider him to be a real expert in his field. But just about the only people that know about that are he and I. So right now, we are facing an uphill struggle. He’s missed the train and the next one coming is going to be really slow.

He’s a survivor and a fighter though and so I think he’ll recover eventually, but this is sadly a big problem, when it so easily might just have been a little blip, or quite possibly a massive opportunity.

So, he’s now fighting for survival with dwindling personal financial resources and no significant opportunities on the horizon.

In some ways, it’s the stories of these guys and the many others just like them that I know, that have been an inspiration for me in writing this blog. Mind you I know also none of them read it...
plus ça change...