Numbers don't lie, but the caveats are many

The Express Employment Services "The Great Shift" study is out and I am busy reviewing it.  While reviewing it an article came out which made me question one of their arguments.  In "The Great Shift" they make the case that more people have left the workforce in the last few years and instead availed themselves of social security disability. While I am still looking at all the research (and to their credit it is extensive) I saw an article on the Atlantic that provides an interesting counterpoint.

Jordan Weissman has an article called "Why the poor don't work, according to the poor", which you can read here:
http://www.theatlantic.com/business/archive/2013/09/why-the-poor-dont-work-according-to-the-poor/279900/

Jordan cites census survey data that explores what factors are influencing those who are making less than the poverty level and are unemployed.  The majority of responses fall under the following reasons: ill or disabled, can't find work, family reasons, retired, school or other. While he discusses his take on the numbers (and how they lead to more questions than answers), he also lists the survey respondent numbers from 1994 to 2012.  This gives a great perspective on the growth and change amongst this income bracket. What stood out to me is while the absolute number of respondents who answered "ill or disabled" grew by 62% over this time period, the total number of respondents grew the exact same percentage.  This implies that there has been no real increase amongst this population, which is contrary to the case put forward by the Express Employment report "The Great Shift"

However, this survey is focused only on those who did not work in the last year and does not examine the same population as "The Great Shift" does (which is the long term unemployed). So this may be explained with more data. More to come, on this and other items!

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Helping get people out of their Funk

The Wall Street Journal has a great interview with Bob Funk, CEO of Express Employment Services, who heads up the fifth largest employment service in the company.  The focus of the interview is on the job market and how it might be impacted by Obamacare (or Affordable Care Act).  It is an interesting perspective from someone who clearly stands to benefit from the changes, but views it as bad policy.  Whatever your politics I urge you to give it a read. You can read the article by following the link below:

 

http://online.wsj.com/article/SB10001424127887324492604579087044033601178.html

 

His perspective on the future of employment and the impact of different policies appears informed by his company’s upcoming report “The Great Shift”, which I for one will be looking forward to reading.  In the interview he makes the case that jobs are available, if one has “integrity, a strong work ethic, and, third, you have to be able to pass a drug test”.  This kind of statement, to me at least, drives home some of the issues in our bifurcating economy.  For many who are looking for jobs of a certain type, they would scoff to realize that these three items are all they need to get employed.  But if you are looking for any job, he is probably right; someone will eventually hire you if you can meet these three criteria.  Whether they will they pay you what you want, offer benefits that you need, and provide you a job that you can enjoy is another question entirely.

 

It is fair to say that the question “How do we create more jobs” can have very different answers when you add things like “that are good paying and enjoyable” or “that will hire anyone who can work”.  It will be interesting to see what question,s and therefore what answers, his report poses.

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If only we could plant money trees

There is an interesting study that was published by the San Francisco Federal Reserve Bank that discusses the difference between job loss of large businesses and small businesses. The report can be found here and, while a bit dry, it’s very interesting.

http://www.frbsf.org/economic-research/publications/economic-letter/2013/september/small-business-job-growth-employment-rate/

The report looks at how businesses, both large and small, have grown and lost jobs over a twenty year period. Its findings show that in both the 2001 recession and the 2008-9 recessions, small businesses have suffered greater job losses and failed to create more jobs than large businesses. The report highlights other research that shows that this may become a big issue in the future as small businesses of today eventually grow into large businesses of tomorrow.

This report provides some new perspective on the importance of supporting small businesses as a formula for economic growth. One aspect the report does not cover is whether systemic changes are driving this.  This could be the growth of shared office spaces where multiple small businesses utilize shared offices and support staff operated by a large business (thus lowering small businesses required admin staff headcounts) or the ease by which small businesses can utilize technology like cloud computing to do more with less employees. The report does cite the challenges for small businesses to secure funding through means such as second mortgages, which is often the source of initial credit or cash flow for many young small businesses.

Either way, the study is a reminder that to grow great jobs in the future, we must plant the right seeds today.

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The Unemployment Rate or What number do you want it to be?

One of the keys to understanding the state of job creation in our country is to understand the science behind the numbers. Everyone is all too familiar with the unemployment rate. This is the number which accompanies the monthly jobs reports and currently sits at 7.3%. This number is derived from a monthly survey the US Department of Labor performs. This survey seeks to gauge America's labor participation, specifically how many people are working full time, how many are looking for work, and how many have given up looking for work.  The headline unemployment number is derived by calculating how many people were unemployed but had been looking for work in the last month divided by the total workforce.

There is another number that is not widely publicized, which is the U6 number.  This number includes the population who are part time workers but who want to work full time and people who are unemployed and have not been recently looking but want a full time job.  This number is much higher, and currently stands at 13.7%.

A further segment of the population that is missing in the survey is the unemployed who have given up looking all together.  These long term unemployed are not even being calculated in the survey data. They are considered no longer part of the workforce.  This group of individuals may be leaving the workforce for many reasons (such as going on disability), but it is a fact that if there was a greater demand for employees this group would be shrinking instead of growing.

Even more confusing with these numbers is that the survey that the Department of Labor uses is not always accurate in identifying who is working and who is not.  For example, there is an article at PBS which discusses the issues surrounding the growing category of individuals who are freelancers.  Sara Horowitz, head of the Freelancers Union, makes the case that the survey questions fail to capture the changing and frequently temporary nature of the work that freelancers do.  It also doesn't adequately categorize those who prefer several part time positions to one full time position. The article can be found here, and is a recommended read:

http://www.pbs.org/newshour/rundown/2013/09/the-unemployment-numbers-as-sham-where-are-the-freelancers.html

As this blog continues to explore this issue, it’s important to take all numbers with a grain of salt.  As Mark Twain said, "'There are three kinds of lies: lies, damned lies, and statistics"!

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Why you need to raise your HQ

James Fallows has a new article that is part of his "American Futures", a writing tour exploring communities across the country, which brought to mind an interesting fact about job: headquarters tend to create more jobs.  His article is a great study in how several large companies are owned and managed from a small Michigan town called Holland, and how Holland benefits as a result.  I highly recommend reading it, and the rest of the series.  You can read more the article here:

http://www.theatlantic.com/national/archive/2013/09/the-next-lesson-from-holland-why-local-money-matters/279251/

In this article he focuses on how local business owners are involved in community improvement efforts from funding lake cleanup, to the arts, to propping up downtown redevelopment. Mr. Fallows mentions another important aspect: the jobs their headquartered companies create.  Companies create jobs to fulfill certain functions of their business, and certain functions, once fulfilled, may not require additional people to do it.  For many companies this includes marketing, press offices, accounting, and legal.  Once you hire a chief marketer or counsel, you will not need to hire another for quite some time.  You might hire more sales people or technicians for a busy site, but you will lean on your central offices press team for quite some time before you hire a press person for any one job site. Additionally, you will want to keep those individuals supporting all your locations at a central location for the business (headquarters) to maximize efficiency.

As a result, places where a business is headquartered gain additional jobs, beyond what the business would create at any other location.  Communities would do well to consider the value of targeting headquarter growth and/or relocation when designing job growth programs.

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