timing is everything

BusinessWeek Writes: The U.S. Job Market Won’t Be Normal Until 2017, Says Goldman

Two economists at the Federal Reserve Bank of Kansas City concluded recently that at the current rate of progress, the U.S. labor market won’t get back to normal until the summer of 2015. That’s bad enough. But Goldman Sachs (GS) economists, examining the same data, conclude in a report today that normal might not arrive until the beginning of 2017.

Either way it’s pretty depressing, considering that the recession began in December 2007. The financial markets are betting that the Federal Reserve’s rate-setting Federal Open Market Committee will start tapering purchases of long-term bonds sometime in early 2014. But the FOMC has said that the purchases will continue“until the outlook for the labor market has improved substantially in a context of price stability.” If the FOMC sticks to that commitment, bond purchases could continue longer than many people expect.

I really have no idea how they come up with these numbers. Maybe they have a supercomputer in their office churning out billions of calculations per second or maybe they just throw darts at the calendar. I think the latter is more plausible.

The problem with their analysis is they are discounting continual economic growth over the next 5 years. Well, let me ask you something. What if instead of economic growth our financial markets and our overall economy go through another severe contraction as I constantly argue? Are we going to normalize by 2017 or will the chart above take another dive? I think you know the answer to that.

The labor market in the US is facing strong headwinds. I think the situation we have today is the new norm and even that will continue to deteriorate. With our economy, financial markets, Obama care, outsourcing, robotics and higher productivity rates all putting negative pressures on full time employment, the labor market picture going forward is not pretty.

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Yahoo Finance Writes: Plenty of Job Openings, but Not For You

At the end of 2004 the ratio of job openings to workers was about the same as today, but the unemployment rate has moved from a tame 5.4% back then to a painful 7.4% today. So why aren’t job hunters snagging those positions and driving down the unemployment rate, as they did in the past?

The “skills gap”

It seems increasingly likely that many people simply don’t qualify for jobs that are open, which highlights the “skills gap” that seems to be developing as laid-off blue-collar workers compete for jobs in a digital-information economy. Manufacturing has lost nearly 2 million jobs since 2006, for example, and while there’s been a modest recovery during the past two years, the odds of reaching the earlier employment peak seem remote. In construction, the real-estate recovery has brought back some jobs, but there’s still another 2-million-job deficit compared with prerecession levels.

Overall, there are about 4.4. million job openings, according to Labor Dept. data. That works out to 2.8% of the labor force, the same as it was at the end of 2004. With 11.5 million Americans looking for work, you’d think they would quickly grab all the jobs that are open.

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Based on my research I do not see how the employment situation will improve any time soon. If anything, I believe that unemployment is being under reported throughout government data. There are just way too many people who are working part time jobs, but who would like to find a full time job.

From a macro economic perspective I do not see anything that would change or reverse this trend. Quite the opposite. With upcoming US Recession, decline in the stock market and continuation of credit defaults, I do not see how the employment situation can improve.

On top of it all you have multiple other trends such as outsourcing and robotics that are taking jobs away. As such, I expect the employment situation to remain the same in the best case scenario or deteriorate significantly if the US economy slips back into the recessionary environment as I anticipate. Bottom line is, if you have a full time job……treasure it.

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