A Strong Jobs Report, Charted

From Oct. 3  NYT “TheUpshot” Blog by Neil Irwin:

Remember a month ago, when a crummy August jobs report raised some questions about just how robust the labor market recovery truly was? Never mind.

The September numbers are in, the last to be reported before midterm elections, and they show a job market that is recovering steadily but surely, with the unemployment rate falling below 6 percent for the first time since July 2008. And a solid 248,000 net new jobs were created.

But what are the finer details of the report telling us about the state of the American labor market? While the overall thrust of the report is unquestionably positive, there are some signs of continued weakness buried in the Labor Department numbers that give some reason for pause.

But first, the good news. The 248,000 gain in September payroll employment is part of a bigger trend over the last year, in which payroll gains have taken a decisive shift upward. You can see the shift in the chart of year-over-year job gains.

Over the course of 2014, the trend has risen from around 2.1 million net new jobs a year to 2.6 million as of September, the strongest since April 2006. That may be the single most important number to know to understand what people are talking about when they discuss the acceleration of American job creation.

So what about that unemployment rate? Crossing below the 6 percent threshold to 5.9 percent is surely a talking point we will hear from Democratic candidates in the remaining weeks of this election cycle, and there is no question it is good news.

And many of the internal details that are part of that decline in the unemployment rate are good, too. In September, 232,000 more people reported being employed and 329,000 fewer people reported being unemployed.

But here’s the less rosy sign of the report. The improving job market does not seem to be pulling people who left the labor force over the last few years back into it. In fact the size of the labor force actually ticked down by 97,000 in September, which in and of itself is too small a number in too volatile a series to make much of, but is part of a longer trend of the size of the labor force holding steady rather than increasing.

Read the entire article and see the graphics here.

What the Poverty Rate Tells Us About the Overall Economy

From yesterday’s NYT “The UpShot” Blog by Jared Bernstein:

On Tuesday, the Census Bureau will tell us whether the share of population that’s officially in poverty went up, down or stayed the same in 2013. There’s tons of other data in the release, like the change in the real income for the median household and information on health insurance coverage.

Because the data is a year old, financial markets ignore it. But political markets pay a lot of attention, as do policy analysts and advocates who work on poverty and middle-class economics. And, of course, these being the early days of the Affordable Care Act, the health coverage data will doubtless also get a close look. My own interest is that of the policy wonk who focuses on the nexus between the overall, or macro, economy and living standards of middle- and low-income families.

It’s an important set of numbers. Although one must always be careful not to read too much into one year’s data, 2013 represents the fourth full year of an economic recovery that officially began in the second half of 2009. Yet this recovery has been uniquely unforthcoming for the poor, the unemployed and even many people in the middle class.

Poverty, as officially measured, has held steady at about 15 percent of the population since 2010, and unfortunately, I expect it to do so again this year. I expect the real median household income to do a little better, up by maybe 1 percent.

Why, if I’m right, should the poor and middle class have gained so little by Year 4 of the recovery? That relates to the answer I tend to give when someone asks me how the economy is doing: Whose economy are you talking about?

Yes, various indicators improved in 2013. Real G.D.P. was up, but no faster than the year before (a bit above 2 percent); same with payrolls. And while the unemployment rate fell seven-tenths of a percentage point in 2013, from 8.1 percent to 7.4 percent, more than half of that was from people dropping out of the labor force. That’s not exactly a sign of strength. In fact, the share of the working-age population with a job barely budged last year.

The real wages of low-wage workers were generally as torpid in 2013. For example, if we look at the hourly wage of those in the bottom third of the pay scale, it averaged a bit above $10 per hour over both 2012 and 2013. However, a stagnant low wage is actually an improvement, because real low wages fell sharply earlier in the recovery. And the real median hourly wage went up 1 percent last year, providing a slight bump to the middle class.

Government policy didn’t help much in 2013, though the official poverty rate captures only some of the antipoverty spending by federal and state governments. For example, unemployment insurance benefits are counted, but the value of nutritional support or the earned- income tax credit (a wage subsidy for low-wage earners) is not.

Fiscal drag — fiscal policy that slows economic growth — was actually a big negative last year, taking 1.5 percentage points off economic growth by most estimates. The relevant parts of that policy for low- and middle-income households would include the ending of a tax break for wage earners (the payroll tax holiday) and less in unemployment insurance benefits.

I used statistical models that forecast the 2013 poverty rate based on the movements of the variables discussed above. Because it’s hard to make a case that the rising tide lifted too many rowboats last year, the models I run predict no statistically significant change in the poverty rate. (The rate could tick down a tenth or two, but that would be statistically indistinguishable from no change at all).

That said, there’s some chance the poverty rate will come down more than I expect. First, there’s just the momentum of a cyclical variable: Eventually the recovery sprinkles at least some of its benefits on low-income households and poverty falls a bit.

Also, there were some changes in the composition of the population last year relative to earlier years that could push the rate down. There was slower growth in immigration and a smaller share of the population in mother-only households (both groups have higher-than-average poverty rates).

Finally, inflation was low in 2013, only 1.5 percent, and that means a smaller nominal gain in income becomes a larger real gain. That’s one reason I predict that nominal median household income grew a bit faster than 2 percent last year. So it is possible they eked out a small real gain thanks in part to such minimal price growth. I expect real growth in the median household income in the 0.5 to 1 percent range.

It’s important to put these results in historical context. I expect poverty to still be 2.4 percentage points above its rate of 12.5 percent in 2007; that’s an additional 7.5 million poor. And even if I’m right about the bump in the real median income, it will still be 7.6 percent below the 2007 level, representing a loss of over $4,000.

In other words, if I’m in the ballpark, Tuesday’s release will be another reminder of why many Americans still feel pretty gloomy about the recovery: It hasn’t much reached them.

The Changing Face of Temporary Employment

From NYT  “TheUpshot” Blog August 31 by Steven Greenhouse:

Temps aren’t just employees who sort mail and answer the boss’s phone.

The work of temping has changed vastly — today 42 percent of temporary workers labor in light industry or warehouses. And there are more of them. The number of workers employed through temp agencies has climbed to a new high — 2.87 million, according to the Bureau of Labor Statistics, and they represent a record share of the nation’s work force, 2 percent.

Labor groups fret that the trend signals the decline of full-time and permanent jobs with good benefits. But what is happening with temp employment is no sharp break with the past.

Temp employment has traditionally followed the business cycle, though in an exaggerated way. Temps are disproportionately thrown out of work when there is a slowdown, but when the economy starts to pick up — with businesses still wary of committing to making permanent hires — they disproportionately hire temps.

More than five years into a recovery marked by halting growth, many businesses are still adding temp jobs rather than permanent ones. “This is a reflection of business uncertainty, that businesses need to be more responsive, and part of that is keeping their work force flexible,” said Steven Berchem, the chief operating officer of the American Staffing Association.

Read the entire article here.

A New Report Argues Inequality Is Causing Slower Growth. Here’s Why It Matters.

From today’s NYT blog “The Upshot” by Neil Irwin:

Is income inequality holding back the United States economy? A new report argues that it is, that an unequal distribution in incomes is making it harder for the nation to recover from the recession and achieve the kind of growth that was commonplace in decades past.

The report is interesting not because it offers some novel analytical approach or crunches previously unknown data. Rather, it has to do with who produced it, which says a lot about how the discussion over inequality is evolving.

Economists at Standard & Poor’s Ratings Services are the authors of the straightforwardly titled “How Increasing Inequality is Dampening U.S. Economic Growth, and Possible Ways to Change the Tide.” The fact that S&P, an apolitical organization that aims to produce reliable research for bond investors and others, is raising alarms about the risks that emerge from income inequality is a small but important sign of how a debate that has been largely confined to the academic world and left-of-center political circles is becoming more mainstream.

Read the entire article here.

Outrage Over Wall Street Pay, but Shrugs for Silicon Valley?

From the New York Times Blog “DealBook” by Steven Davidoff:

Big paydays on Wall Street often come under laserlike scrutiny, while Silicon Valley gets a pass on its own compensation excesses. Why the double standard?

Take Eric Schmidt, the former chief executive and current chairman of Google. Google’s compensation committee last month awarded Mr. Schmidt $100 million in restricted stock plus $6 million in cash. The stock vests in four years and comes on the heels of a $100 million award made in 2011.

It’s unclear why Google felt the need to award Mr. Schmidt this amount.

When asked for comment, a representative of Google directed me to the regulatory filing Google made disclosing Mr. Schmidt’s compensation award. The filing states the award was paid “in recognition of his contributions to Google’s performance in fiscal year 2013.” How about that for detail?

Mr. Schmidt already owns shares worth billions of dollars in Google, and has a net worth of more than $8 billion, according to Forbes. So the latest award amount is just a few ducats to him.

As chairman, Mr. Schmidt does make a substantial contribution to Google, including helping the company negotiate a settlement with the European Union in an antitrust case. But his pay is extraordinarily high for a chairman. The typical director at a Standard & Poor’s 500 company was paid $251,000 in 2012, according to Bloomberg News. Mr. Schmidt is above that range by over $100 million.

Still, the pay award was greeted with few questions and apparently no criticism from Google’s shareholders or others. Compare this with the continued outcry over Wall Street executive pay.

The latest was the criticism of Jamie Dimon’s pay for 2013, given the many regulatory travails of his bank, JPMorgan Chase. The bank’s board awarded Mr. Dimon $20 million in pay for 2013, $18.5 million of which was in restricted stock that vests over three years.

In doing so, the JPMorgan board stated that the award was justified because of JPMorgan’s “sustained long-term performance; gains in market share and customer satisfaction; and the regulatory issues the company has faced and the steps the company has taken to resolve those issues.”

While JPMorgan may be hogging the regulatory limelight at the moment, other Wall Street banks have faced that glare and have been questioned about their chief executives’ compensation. Total pay for Lloyd Blankfein of Goldman Sachs, no stranger to regulatory scrutiny, has not yet been disclosed, but he was recently awarded $14 million in stock. Once his cash bonus is announced, Mr. Blankfein will probably be paid an amount similar to Mr. Dimon’s.

Like JPMorgan’s board, Goldman’s board has sought to justify such pay and is criticized just the same.

This double standard for finance and technology doesn’t make sense.

Read the entire article here.

Why I Didn’t Give Year-End Bonuses

From the New York Times blog, “You’re the Boss” by Jay Goltz:

A couple of weeks ago, my production manager asked me a question that I have not looked forward to answering for several years now. “Are we going to be giving any bonuses this year?” asked Dale, who oversees 38 people in my picture-framing business.

For years, I have given an end-of-the-year bonus to everyone who works for me — the exception being when sales have declined because of a recession. Unfortunately, that’s been the case since 2008. I told Dale that there would be no bonuses for 2013. We are doing better, we are almost there, but it would be irresponsible for me to give them out at this point.

My businesses are all home-furnishings-related, which means they rely on discretionary spending, and they are most certainly affected when consumer confidence falls. In our case, and the case of many small-business owners I know, business has not rebounded from this recession the way it did from the previous recessions I have lived through.

Although it has been several years since the recession came to an official end, there have been plenty of other issues keeping things challenging: more competition, changing buying habits, higher expenses, to name a few. I don’t mean to complain. Things are continuing to get better for my businesses, in part because of the (slowly) improving economy and in part because several investments that I made in new products, new equipment and a new warehouse and production building are beginning to pay off. None of these improvements came cheap, and in the short-term, they all had a negative impact on our cash flow. I remain confident, however, that they are starting to help and will pay off in the long term.

I asked Dale if he wanted me to explain the situation at the weekly production meeting? I didn’t take the time to explain last year, and I now know that wasn’t a good decision. But it was easy, which is often a bad sign.

Dale: “You could just skip the meeting. I’m afraid that no matter what you say, people are going to be aggravated.”

Jay: “You know what? You’re the one that has been on the front line with people asking for more money and I think you may be suffering from battle fatigue. I have to believe that most people will understand. And even if it is only some of them who don’t, I think I owe them an explanation.”

Dale: “You’re right. Have the meeting. We’ll see what happens.”

Jay: “I have to tell you, I’m a little frustrated myself. We didn’t lay anyone off, we have gotten everyone back to full hours plus a good amount of overtime, and this year we have caught up on raises. I would have loved to give out bonuses, but the thought of people being mad that they didn’t get a bonus — abonus! — when we didn’t make enough money to justify it, doesn’t make me feel great. If I wanted to be cynical, I could argue that I should have never started giving bonuses in the first place.”

Dale: “I understand, but you know how people are. They are more upset if you take something away than if you never gave it to them in the first place.”

Jay: “I know. But I would like to believe that they will get it. I can tell you this, while I wish we could have given bonuses, I certainly don’t feel guilty about it. It would have been a really bad business decision. We’re growing again, we’re stable, and if everything goes as planned, we should be able to give bonuses in 2014.”

So I had the meeting about two weeks before Christmas. I explained all of the things that we have been spending money on, and all of the good results that have started to pay off. For the sake of those employees who were not here five years ago, I went through our sales history. And I reminded them that they are working at a stable company in an unstable market. And I thanked them all for working together to get us where we were. As they say in sports, I left it all on the field. There were no comments or questions. Everyone went back to work, except for me.

I waited around until the jury came back, which took about 20 minutes. One of the supervisors gave me the verdict: Several people he spoke to said they appreciated that I had given them the whole story. They understood that we have been rebuilding, and they are happy to have a stable job where they are treated well.

Now, do I believe that everyone is happy all of the time and that they think I am the greatest boss ever? Of course not. But we have very little turnover, which is part of the reason I believe that most employees understand and that most appreciate the fact that I appreciate them. And if the rest are justpretending to get it, that’s O.K., too. I plan on giving bonuses out at the end of 2014, and if that happens, it will be a very happy day for me, as well as for them.